Investors versus Speculators

 Investor

 Speculator

• Views share ownership as a % interest in the business

• Views "stock" as piece of paper to be traded

• Believes market often misprices business and at times is inefficient

• Believes market price is the value of the business and the market is efficient

• Asks, what is the business worth

• Asks, where is the stock going

• Makes investment decision based on appraisal of corporate intrinsic value and qualitative judgments
  regarding competitiveness and management

• Looks to stock price/charts for clues to buy and sell

• Focuses on capturing mispricing

• Tries to time the market or forecast prices

• Seeks large "margin of safety" of value greater than price for preservation of capital and a promise of return

• Seeks chart patterns for trading profits

• Concentrates on business economics

• Ignores business fundamentals

• Is patient and has a long term investment time horizon

• Is impatient with a short term trading  time horizon

• Disciplined, willing to wait for high probability, understandable, opportunity

• Feels pressure to always be "playing"

• Incurs low costs and taxes

• Incurs high costs and taxes

• Commitments have high probability of success

• Commitments have marginal probability of success

• Rarely uses any leverage

• Often is highly leveraged

• Is comfortable with a defendable contrary position

• Is uncomfortable unless following the consensus

• Thinks independently

• Is usually part of the "crowd"

• Looks to new low list for opportunity

• Focuses on the new high list

• Defines risk as probability of losing permanent capital considering business and financial risks

• Defines risk as stock price volatility, beta

• Believes in adequate but not over diversification

• Often ignores diversification