To see how much a company is truly earning on the capital it deploys in its businesses, look beyond EPS to Return on Invested Capital (ROIC).

We have been trying to point out that this concept of an indefinitely favorable future is dangerous, even if it is true; because even if it is true you can easily overvalue the security, since you make it worth anything you want it to be worth. Beyond this, it is particularly dangerous too, because sometimes your ideas of the future turn out to be wrong. Then you have paid an awful lot for a future that isn't there. Your position then is pretty bad.

There is a close logical connection between the concept of a safety margin and the principle of diversification.

Those with the enterprise lack the money and those with the money lack the enterprise to buy stocks when they are cheap.

Although there are good and bad companies, there is no such thing as a good stock; there are only good stock prices, which come and go.

The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists.

The intelligent investor should recognize that market panics can create great prices for good companies and good prices for great companies.