The advice "you never go broke taking a profit" is foolish.

Calculate "owner earnings" to get a true reflection of value.

Does management resist the institutional imperative?

Is management candid with the shareholders?

Does the business have favourable long term prospects?

Is management rational?

In the end, alchemy, whether it is metallurgical or financial, fails. A base business can not be transformed into a golden business by tricks of accounting or capital structure. The man claiming to be a financial alchemist may become rich. But gullible investors rather than business achievements will usually be the source of his wealth.

If you expect to continue to purchase stocks throughout your life, you should welcome price declines as a way to add stocks more cheaply to your portfolio.

Wild swings in share prices have more to do with the "lemming- like" behaviour of institutional investors than with the aggregate returns of the company they own.