Wisdom Of Warren Buffett – Keep It Simple, Do What Works

There is certainly no shortage of information available to the average investor – arguably, there is too much information and too little time to absorb it all.

Of course, the information kettle that runneth over gets ever frothier when it is stirred four times a year during quarterly earnings season.

Amazing as it might seem, all this information really doesn't concern the Oracle of Omaha, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) Chairman Warren Buffett, as much as it concerns most investors.

Although this may seem counter intuitive for any businessman, apparently, once Buffett has decided to purchase all or part of a business, he has already made sure that his kettle contains the proper ingredients required for success.

Related Link: Buffett's Berkshire Raises Stakes In Charter, Visa, GM

A Handy Little Book

In 1997, Janet Lowe published "Warren Buffett Speaks – Wit and Wisdom from the World's Greatest Investor." The book is a little less than 200 pages, pocket-size and filled with a lot of white space.

In fact, here is the gist of the book in a few of sentences:

It's Not That Complicated "Stocks are simple. All you do is buy shares in a great business for less than the business is intrinsically worth, with managers of the highest integrity and ability. Then you own those shares forever." On Finding Managers "Build A Circle Of Competence."

"Draw a circle around the businesses you understand and then eliminate those that fail to qualify on the basis of value, good management and limited exposure to hard times."

How To Go Forward "I would take one industry at a time and develop an expertise in half a dozen… If I were looking at an insurance company or a paper company, I would put myself in the frame of mind that I just inherited that company, and it was the only asset that my family was ever going to own."

On The Importance Of Paying Attention "Buy Reading Glasses."

"I read annual reports of the company I'm looking at and I read the annual reports of the competitors – that is the main source of my material."

"I'm very suspicious. I won't invest in a company if I can't understand the footnote, because I know they don't want me to understand it."

"Keep It Simple."

"If you have to go through too much investigation, something is wrong."

Again, It's Not Complicated "You should invest in a business that even a fool can run, because someday a fool will." "Don't sweat the math."

"You don't need a rocket scientist," to be a shrewd and successful investor.

"If calculus were required, I'd have to go back to delivering papers. I've never seen any need for algebra. Essentially, you're trying to figure out the value of a business. It's true that you have to divide by the number of shares outstanding, so division is required."

"Whether you made the right purchase or not would depend on the future earning ability of that enterprise, and then relating that to the price you are being asked for the asset."

On Calculating Value "Price is what you pay, value is what you get."

"Read Ben Graham and Phil Fisher, read annual reports, but don't do equations with Greek letters in them."

"(Graham) said you should look at stocks as small pieces of businesses. Look at (market) fluctuations as you friend rather than your enemy – profit from folly rather than participate in it."

The Three Magic Words "And in the last chapter of The Intelligent Investor, he (Graham) said the three most important words of investing: 'margin of safety.' I think those ideas 100 years from now, will still be regarded as the three cornerstones of sound investing."

What If Buffet's Way Is Too Difficult?

He suggests you try the Will Rogers philosophy – study the markets carefully before buying a stock, then: "When the stock doubles, sell it."

"If it doesn't double, don't buy it."