Fortunately for my future well-being, I have an intense dislike for losing money. I have always believed that the chief difference between a fool and a wise man is that the wise man learns from his mistakes, while the fool never does. The corollary of this is that it behooved me to go over my mistakes pretty carefully and not to repeat them again.
My approach to investing expanded as I learned from my 1929 mistakes. I learned that, while a stock could be attractive when it had a low price earnings ratio, a low price earnings ratio by itself guaranteed something and was apt to be a warning indicator of a degree of weakness in the company. I began realizing that, all the then current Wall Street opinion to the contrary, what really counts in determining whether a stock is cheap or overpriced is not its ratio to the current year’s earnings, but its ratio to the earnings a few years ahead. If I could build up in myself the ability to determine within fairly broad limits what those earnings might be a few years from now, I would have unlocked the key both to avoiding losses and to making magnificent profits!