Buy a business, not a stock (Warren Buffett Quote Series 1) ~ The stock price is speculation, the business is real substance
Buy a business, not a stock
What I’m often asked is “What is the lower price threshold for this stock?”How far would it have to rise for it to go up?”
Whenever I hear that,I realize how bound investors are to the “price”.
What we buy is not a number called stock price. Stocks are a claim to ownership in a company.
The company’s managers and the people who work there strive daily to generate sales. After paying expenses such as salaries from the sales, the remaining profit is eventually distributed to the shareholders.
What we should focus on is this business activity.
If the business is doing well, profits rise, and eventually the stock price reflects that.We must buy such “good businesses.”.
Why stock prices change every day
So why do stock prices move every day?
That’s becausepeople’s expectations come into play. Even a small rumor or a change in mood can completely alter how one views a business.
A friend of mine had a girlfriend,and one day he suddenly started carelessly holding chopsticks and said he no longer liked her.
At this moment,the girlfriend herself hasn’t changed at all. However, because the friend suddenly became conscious of it, his feelings changed 180 degrees.
Stock price fluctuations are often like this.
In the short term, stock prices can change in a flash like this. That’s why forecasting stock prices is difficult, and there is no certainty around the movement or the “lower bound.”
What changes and what does not
On the other hand,the business does not change so easily. There isn’t some sudden doom tomorrow; a good business remains a good business.
In my friend’s example,it is important to take a good look at oneself. If you have enough character to tolerate the way she holds chopsticks, you can continue the relationship; if not, it’s better to break up.
Just as there are countless potential partners, there are countless stocks to invest in.
Do not be swayed by the momentary mood of stock price changes; instead, thoroughly understand the other party—the business—and ultimately find a wonderful partner, which is also required for long-term investing..
Buy a business, not a stock
Warren Buffett
