Investing and the Art of Due Diligence
Buffett: Well, what we’re doing in investment – and what everybody does – is we’re laying out money now to get more money back later on. Now, let’s leave the market aspect of the asset out of it. When you buy a farm, you really aren’t thinking about what the market on it is going to be tomorrow, next week, or next month. You’re thinking about how many bushels of beans or corn per acre you can get, and what the price is likely to be. You’re looking to the asset itself . And in the case you lay out, the first question you have to ask is, do I understand enough about thus business so that the financial statements can tell me the information that is useful to me to make a judgement about what the future financial statements are going to look like? And in a great majority of cases, the answer would probably be no. But I’ve bought stocks the way you’re describing many times. And they were in businesses that I thought I understood where if I knew enough about the financial ...