This is the cornerstone of our investment philosophy: Never count on making a good sale. Have the purchase price so attractive that even a mediocre sale gives good results. —Warren Buffett. Buffett remains mum about stocks he is buying or is about to buy, but he has been pretty open about explaining his general investment strategy. | CCC-Boroson 2 45-90 8 28 01 1 27 PM Page 61 CHAPTER 9 Buy Screaming Bargains This is the cornerstone of our investment philosophy Never count on making a good sale. Have the purchase price so attractive that even a mediocre sale gives good results. Warren Buffett Buffett remains mum about stocks he is buying or is about to buy but he has been pretty open about explaining his general investment strategy. His strategy unfortunately is not so simple as it may first appear. He uses a number of different gauges and sometimes buys stocks that don t seem to fit his criteria very snugly. And he is a qualitative as well as a quantitative investor using not just science and numbers but art. Still he has one vital rule Try to buy entire companies or their stock cheap. That will provide the margin of safety that Benjamin Graham was so intent upon. If something goes amiss you won t lose much because a margin for error or just bad luck has been built in. Alas it s not easy to distinguish between a stock that s cheap and a stock that s fully priced or even overpriced. A few years ago a portfolio manager showed me a screaming bargain a good company with simply unbelievably wonderful numbers UST. Formerly . Tobacco. In other words a seeming screaming bargain might just turn out to be a problem stock. And the numbers alone won t help you decide which is which. Of course one way of dealing with this is to buy a number of 61 CCC-Boroson 2 45-90 8 28 01 1 27 PM Page 62 62 BUY SCREAMING BARGAINS stocks that seem to be screaming bargains. Enough of them should turn out to be the genuine article providing you with a decent profit. But that s not Buffett s way. He wants to identify true screaming bargains in advance and not take a chance that some of his choices won t work out. He wants near certainty. Yes there are screaming bargains out there and that is what Buffett is searching for the occasional sometimes very occasional screaming bargain. In any case one should remember as the .
