So, anytime we look at a company, we look at the bonds and we look at the stock. Now in the early '80s prospect of returns on bonds were as high as stocks, from '81 to '93 I was a third in bonds, because the numbers were there.
Today, there is an unusually wide spread between interest rate returns and prospective returns when I look at what the company is earning and their return on equity stands, so what I'm paying for stocks look much cheaper than bonds in here. So we always look at one versus the other.
He makes the point that if a company is generating cash and they don't pour it "down a rat hole" shareholders get value for that. He later added...
So, we found a long time ago that if we allow the numbers to tell us where to go, they do a pretty good job of it. And then you do your homework to be sure that the numbers are believable, and after that it's just a stomach problem. Is your stomach good enough to live through the--because the only time you can buy a good company cheap is when somebody didn't like it."
If you can take the emotion out of the equation it's a whole lot easier. Check out the rest of his comments here.