Common Stocks and Common Sense

INTRODUCTION

I have a passion for common stocks. For the past 30-plus years, I have studied the fundamentals of companies and industries, interviewed managements, visited offices and factories, constructed models of possible future earnings, and made thousands of decisions to purchase and sell stocks. My endeavors have been intense, exciting, fun, and successful. Thousands of other investment managers, many with higher IQs than mine, also have intensively searched for stocks that will appreciate sharply, but relatively few have been as successful as I have been. Why have I been able to succeed? There is no simple answer. If there were a simple answer, most others also would have found and adopted successful approaches to investing and would have enjoyed outsized returns. This has not happened. However, there must be reasons why some investors are better than others.

With the hope that others will benefit from my approach to investing, this book will explore what I believe to be the reasons for my relative success and will describe the reasoning behind the investment decisions that I made over the years. How will I do this? I am a product of the Harvard Business School, which teaches business via the case method. Because I believe that the case method is an interesting, relevant, and effective way to explain the strategies and thinking behind business and investment decisions, I used the method in this book. Chapters 3 through 13 in this book give an inside view of 11 investments ...