Probably the most consistent indicator of success I’ve seen is humility. Microsoft, Apple, many writers/musicians, etc. all eventually fail when they think they can put out any crap and still have great sales. They believe they know better than the customers what is good or bad. Usually, these companies were successful in the first place because they had an illegal monopoly (Microsoft,) were pioneers in a particular field (Apple,) or became a short-lived fad (usually among young people) like Twilight.
On the other hand, SuperCell (makers of Clash of Clans, a game that generates at one point $1 mill per day) never took success for granted. First, they take as much time as necessary to develop their product. Then, to avoid watering down the brand, they release/beta the game in Canada only, continuing to develop it as time goes by. They maintain a bulletin board and several full time employees to monitor it just to measure customer satisfaction. Updates, tweaks, bug-fixes, and new content is added monthly.
There’s an old expression: the first step in failure is success. Companies that become arrogant always fail after success. Those that stay humble never do.
Investors (like Warren Buffet) do not make money by picking “good” stocks. Rather, they create portfolios which will behave favorably in a variety of circumstances and events. Its not “what is the true value of the stock”, but “what is this stock worth to me?”
Oh and if you’re interested in the veracity of the financial statements, look at their methodology disclised in the notes, read the audit report, and I think the PCAOB might even have extra information on the quality of the audit. Also, the company will often field questions with analysts. There are public discussions of a company often. Plus just comparing their companies numbers with similiar companies.
I mean, many very smart people do this stuff for a living. It can get complicated depending on where you wanna set the bar.
That rule was unsubstantiated. For an example of how such a strategy can deliver sup-par returns consider the Nifty Fifty. They were called, “One decision stocks.”
Cite that Buffet aims for portfolio diversification? Berkshire Hathaway is rather exposed to the insurance industry. (You might be correct, but my perception is that Buffet seeks “Wide motes” which is a different sort of strategy. I don’t recall any argument of his that emphasized that a particular combination of stocks was better than each taken singularly.)
I agree with Measure for Measure. Buffet is markedly non diversified. While he does have 43 stocks in his porfolio according to CNBC’s tracking of his SEC reports, at a closer look 81% of his holdings are in only 10 stocks, and 62% are in only 4 stocks. I don’t see a lot of insurance exposure, but 40% of the holdings are in finance and banking, almost 22% in Wells Fargo and a little over 12% in American Express.
He does have a piece of Goldman Sachs, but it’s less than 2% of his holdings. Not quite Bernie Madoff.