“Margin of Safety” is important.
Berkshire’s insurance operations leverage float (funds temporarily held before claims are paid) to generate low-cost capital.
Buffett values market downturns as opportunities to acquire quality investments at discounted prices – “fears of a California real estate disaster similar to that experienced in New England caused the price of Wells Fargo stock to fall almost 50% within a few months during 1990.”
Buffett did more old-fashioned “fallen angels” investment with RJR Nabisco bonds. But “angels” only – “as we survey the field, most low-grade bonds still look unattractive. The handiwork of the Wall Street of the 1980s is even worse than we had thought: Many important businesses have been mortally wounded.”
Again, Buffett invested in an industry with fierce competition and is asset heavy – airlines (instead of textile). ” In a business selling a commodity-type product, it’s impossible to be a lot smarter than your dumbest competitor”