Margin Trading

“Investor anticipations, similar to the laws of economics, are shaped at the margin. That is why changes in earnings estimates follow, for the most part, changes in stock prices, and not vice versa as it should be.”

“As all of us were taught, but most of us have long since forgotten, economic change occurs at the margin, where the action takes place.”

“Wall Street is pure economics and when profit opportunities look good, debt leverage makes them look better.”

“Warren and I are chicken about buying stocks on margin. There’s always a slight chance of catastrophe when you own securities pledged to others. The ideal is to borrow in a way no temporary thing can disturb you.”

“He exploits the quality minus junk factor with leverage”

“I think I am safe in asserting that the margin trader, speculator, gambler, or whatever you choose to designate the average man who goes to Wall Street after easy money, does not lose money when he sells. He loses it when he buys!”

“Trees don’t grow to the sky, and neither do profit margins”

“Margin of safety is not optional.”

“Leverage removes the ability to wait.”

“When you look carefully at the economics of shorting, it makes no sense to take the bet. The lowest price a company’s stock can go to is zero, but there’s an unlimited upside. An unleveraged short position has a maximum payoff of 2:1.”

“When you have a family, and a house, and the market is going down, and you’re on margin, it’s probably too much pressure for you to do the right research and the right kind of thinking to make good decisions.”

“I had a margin call in 1924, and I swore I never would buy on margin again. That’s one of the main reasons I got through the 1930s.”

“Margin of safety is simply the idea that you want room to be wrong.”

“The ability to not be getting margin calls, not be having redemptions, not be scared out of your mind when something’s gone against you is probably the most enhancing thing to long term returns.”

“The main underlying principle of value investing is that you should invest in undervalued securities because they alone offer a margin of safety.”

“Sometimes a company which has a relatively low profit margin is able greatly to increase its sales volume without increasing its capital investment and thereby increase its earnings per share.”

“While the trend in profit margins is one of the most important factors to consider, it is not always the company which reports the higher profit margin that proves to be the better growth stock.”

“I’ve made so many mistakes over the years that I struggle to isolate just one as the biggest single mistake. Among the choices though I think excessive leverage has been the most personally painful.”

“Be careful of leverage. It can go against you.”

“I got three ideas out of Ben’s book that have been the cornerstone of everything I’ve done, which are to look at stocks as part of a business rather than simply little things that go up and down. And then I took to heart his Mr. Market saga, which I think is vital to having the right attitude toward market fluctuations. Then third, the margin of safety.”

“When the price of a stock can be influenced by a “herd” on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical.”

“We learned in the ’20s that markets with participants playing heavily on margins could be more dangerous than markets where people are dealing in cash.”