The most distinguishing trait of Buffett's investment philosophy is the clear understanding that, by owning shares of stock, he owns businesses, not pieces of paper.
The idea of buying stock without understanding the company's operating functions - including a company's products and services, labour relations, raw material expenses, plant and equipment, capital reinvestment requirements, inventories, receivables, and working capital needs - is unconscionable, says Buffett.
A person who holds stocks has the choice to become the owner of a business or the bearer of tradable securities. Owners of common stocks who perceive that they merely own a piece of paper are far removed from the company's financial statements. These owners behave as if the market's ever-changing price is a more accurate reflection of their stock's value than the businesses' balance sheet and income statement. They draw or discard stocks like playing cards.