Archives of “value investor” tag

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Investing Like Warren Buffett.

  
  Education
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In fact there are a couple of professors in Ohio, who studied any stock that Warren Buffett bought, if you bought on the last day of the month, when it was public that he owned that stock, and you sold it after it was public that he had started selling it, you would have generated north of 20% annual rate of return.

I would say that we will never see another Warren Buffett. Just like we will never see any Albert Einstein or another Mahatma Gandhi. Buffett is a very unique individual. His skillsets outside of investment are phenomenal but they get dwarfed by his investing skills. The main thing that makes Warren Buffett Warren Buffett is that he is a learning machine who has worked really hard for, let’s us say seventy years, and is continuously learning every day.

So the thing is if you want to be like Buffett, there is no short cut. First of all, you have to be deeply interested in investing and you have to be very willing spending tens of hours, hundreds of hours, reading the minutiae. There is a very famous value investor called Seth Klarman. He is into horse racing. And his famous horse is called Read the Footnotes.”

The Strategy Of John Neff

  
  Education
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MUST READTaken from the April 26, 2013 issue of The Validea Hot List

Guru Spotlight: John Neff

Most investors wouldn’t give a fund described as “relatively prosaic, dull, conservative” a second glance. That, however, is exactly how John Neff described the Windsor Fund that he headed for more than three decades. And, while his style may not have been flashy or eye-catching, the returns he generated for clients were dazzling — so dazzling that Neff’s track record may be the greatest ever for a mutual fund manager.

By focusing on beaten down, unloved stocks, Neff was able to find value in places that most investors overlooked. And when the rest of the market caught on to his finds, he and his clients reaped the rewards. Over his 31-year tenure (1964-1995), Windsor averaged a 13.7 percent annual return, beating the market by an average of 3.1 percent per year. Looked at another way, a $10,000 investment in the fund the year Neff took the reins would have been worth more than $564,000 by the time he retired (with dividends reinvested); that same $10,000 invested in the S&P 500 (again with dividends reinvested) would have been worth less than half that after 31 years, about $233,000. That type of track record made the understated, low-key Neff a favorite manager of many other professional fund managers — an “investor’s investor”, if you will. (more…)

Book Review: Market Indicators

  
  Education
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MARKETINDICATORS

Every one one us has limited bandwidth for analysis of data. We pick and choose a few ideas that seem to work for us, and then stick with them. That is often best, because good investors settle into investment methods that are consistent with their character. But every now and then it is good to open things up and try to see whether the investment methods can be improved.

For those that use market indicators, this is the sort of book that will make one say, “What if? What if I combine this market indicator with what I am doing now in my investing?” In most cases, the answer will be “Um, that doesn’t seem to fit.” But one good idea can pay for a book and then some. All investment strategies have weaknesses, but often the weaknesses of one method can be complemented by another. My favorite example is that as a value investor, I am almost always early. I buy and sell too soon, and leave profits on the table. Adding a momentum overlay can aid the value investor by delaying purchases of seemingly cheap stocks when the price is falling rapidly, and delaying sales of seemingly cheap stocks when the price is rising rapidly.

Looking outside your current circle of competence (more…)

Lessons From John Templeton

  
  Education
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1. “I never ask if the market is going to go up or down, because I don’t know, and besides it doesn’t matter. I search nation after nation for stocks, asking: Where is the one that is lowest priced in relation to what I believe its worth?” Like every other great investor in this series of blog posts John did do not make bets based on macroeconomic predictions. What some talking head may say about markets as a whole going up or down was simply not relevant in his investing.  John focused on companies and not macro markets. He was a staunch value investor who once said: “The best book ever written [was Security Analysis by Benjamin Graham].

 2. “If you want to have a better performance than the crowd, you must do things differently from the crowd.  I’ve found my results for investment clients were far better here [in the Bahamas] than when I had my office in 30 Rockefeller Plaza.  When you’re in Manhattan, it’s much more difficult to go opposite the crowd.”  The mathematics of investing dictate that investing with the crowd means you will earn zero alpha, because the crowd is the market.  You must sometimes be willing to take a position that is different from the crowd and be right about that position, to earn alpha. John put it this way: “If you buy the same securities everyone else is buying, you will have the same results as everyone else.” 

 3. “The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.  Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria.  People are always asking me: where is the outlook good, but that’s the wrong question…. The right question is: Where is the outlook the most miserable? For those properly prepared in advance, a bear market in stocks is not a calamity but an opportunity.”   To be able to sell when people are most pessimistic requires courage.  Being courageous is easier if you are making bets with “house money.” Making bets with the rent money is always unwise.  Templeton believed problems create opportunity. For example, it was on the day that Germany invaded Poland that he saw one of his best buying opportunities since prices were so low and values so high.  Simply telling his broker that day to buy every stock selling under $1 yielded a 4X return for John.  (more…)

How Mohnish Pabrai Crushed The Market By 1100% Since 2000

  
Analysis, Education
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Mohnish Pabrai’s long-only equity fund has returned a cumulative 517% net to investors vs. 43% for the S&P 500 Index since inception in 2000.  That’s outperformance of 474 percentage points or 1103 percent. [Disclosure: I and/or some of my clients are long Pabrai’s fund or specific holdings within his fund.]

To anticipate your next question: Yes, his fund is closed to new investors.  But there is still hope.  Read on — sadist that I am, I put the answer at the end

Pabrai is a classic value investor in the tradition of Warren Buffett, Charlie Munger, Seth Klarman and Joel Greenblat. I recently had an opportunity to hear him talk and thought I’d pass along some of my bright yellow highlighting.

How to start investing (more…)

World’s Oldest Trader

  
  Education
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World’s oldest Value Investor. Duly noted (hat tip to Mr. Melvin) that Irving Kahn is a former Ben Graham assistant and likes to buy and hold for long time– and not really a “trader” per se.

From the WSJ:


Discipline has been a key for Mr. Kahn. He still works five days a week, slacking off only on the occasional Friday. He reads voraciously, including at least two newspapers every day and numerous magazines and books, especially about science. His abiding goal, he told me, is “to know much more about the stock I’m buying than the man who’s selling does.” What has enabled him to live so long? “No secret,” he said. “Just nature’s way.” He added, speaking of unwholesome lifestyles: “Millions of people die every year of something they could cure themselves: lack of wisdom and lack of ability to control their impulses.”

Here is a link to his current portfolio (he includes a land-based driller). 

Top 25 All-Time Warren Buffett Quotes

  
  Education
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When reading Berkshire Hathaway’s annual letters or hearing him speak, one can always take away a few great quotes from value investor extraordinaire Warren Buffett. It should come as no surprise that he is so good at dishing out words of wisdom. After all, he is known as the Oracle of Omaha. We thought it would be prudent to assemble some of his best advice in one cohesive post.MYQUOTES
1. “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1”
2. “In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.”
3. “The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable.”
4. “Be fearful when others are greedy. Be greedy when others are fearful.” (more…)

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