Maximizing Value: A Guide to Rational Stock Ownership

I love it when the things we buy go down. I just, I get euphoric when you go to the grocery store and you buy something cheaper than you bought it the day before, you think that’s terrific. But people with their stocks, they think that the stock knows more than they do. Stock doesn’t care what you’ve paid. You have to remember, the stock doesn’t even care that you own it. And so the only question with every stock every day, and you don’t do it this frequently, is can I get more for my money someplace else? You’ve got a chance to be in thousands and thousands of great businesses, and their prices change all the time, so their relative valuations change. And you can make the exchange at very low cost these days, commissions or nothing. So you can always shift from one business to another. You have a huge advantage over Andrew Carnegie. When he was in the steel business, he was in the steel business, or Rockefeller was in the oil business. He could not shift over immediately to retailing or something like that. You can rearrange your business empire, which you own through that little portfolio that you have. You can rearrange that at a moment’s notice with practically no cost. It’s a huge advantage, which people turn into a disadvantage. There is nothing about the price action of the stock that tells you whether you should keep owning. What tells you whether you should keep owning it is what you expect the company to do in the future versus the price at which it’s selling now, compared to the other opportunities of businesses that you think you know equally and make that same comparison. And that’s all there is to owning stocks.