The most common cause of low prices is pessimism, some times pervasive, some time specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like prices it produces. It's optimism that is the enemy of the rational buyer.
None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular, a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling. Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: "Most men would rather die than think and many do".
- Buffet's 1990 letter to shareholders
None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular, a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling. Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: "Most men would rather die than think and many do".
- Buffet's 1990 letter to shareholders
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