“Take a simple idea and take it seriously.”
I wish I had said that but, it was Charlie Munger of Berkshire Hathaway Inc. (NYSE:BRK-A).
Charlie is the Oscar Wilde of Finance in that there seems to be a Mungerism for every occasion, but this is my favorite and probably the most important of them all, “Sometimes we overcomplicate the investment process, and it hurts our long-term returns.”
Applying the concept of taking simple things seriously works very well when it comes to bank stocks. It doesn’t need to be rocket science by any stretch of the imagination.
It occurred to me some years ago that a portfolio of bank stocks that traded at low Price-to-Earnings ratios, and paid a reasonably high dividend, would be a pretty profitable endeavor. As it turns out, I was almost right.
Applying these simple factors to bank stock is not just pretty profitable; it is wildly profitable.