Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
We would do best in a market where everyone acted foolishly.
The first rule is not to lose. The second rule is not to forget the first rule.
Of one thing be certain: if a CEO is enthused about a particularly foolish acquisition, both his internal staff and his outside advisors will come up with whatever projections are needed to justify his stance. Only in fairy tales are emperors told that they are naked.
Risk can be greatly reduced by concentrating on only a few holdings.
We say we are trying to buy into businesses with excellent economics, run by honest and able people at a decent price. We buy very few securities, so we look at it as "focused" investing.