Time is the friend of the wonderful business, the enemy of the mediocre
Think Long-Term
Long-term investment commitments can provide tax advantages through deferred taxes
Rip Van Winkle-style investing minimizes taxes and transaction costs
Patient investors don't need to constantly seek optimal returns if existing investments are satisfactory
Economic Characteristics Matter
Seek businesses with consistent earning power, good returns on equity, and little debt
Avoid businesses with poor economics, regardless of management quality
"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact"
Look for Exceptional Management
Partner only with people you like, trust, and admire
Never compromise on management quality, regardless of business prospects
"We've never succeeded in making a good deal with a bad person"
Simplicity and Understanding
Focus on understanding simple businesses, avoid complex technology
Stick with investments within your circle of competence
"We've done better by avoiding dragons than by slaying them"
Beware the Institutional Imperative
Organizations resist change and mindlessly imitate peers
Available funds attract potentially wasteful projects and acquisitions
Leaders' initiatives, however foolish, get supported by detailed justifications
Conservative Financing
Maintain conservative financial policies even at the cost of some return
A small chance of distress cannot be justified by higher expected returns
Leverage merely accelerates results, both good and bad
Avoid Complexity and Financial Engineering
Be skeptical of zero-coupon bonds and other complex instruments from weak issuers
Beware of adjusted metrics like EBDIT that ignore real expenses
"At 95% of American businesses, capital expenditures that roughly approximate depreciation are a necessity"
Patience in Acquisition
Wait for the right opportunity rather than compromising on quality
Look for demonstrated performance, not projections or turnarounds
Focus on identifying one-foot hurdles to step over rather than seven-footers to clear
