Value Invest

March 2012

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March 30
09:00 2012
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March 2012 Issue 8

The London Value Investor Conference – 19th April 2012
www.londonvalueinvestor.com
Since Issue 7, progress and interest in the conference has been beyond all our expectations. In February, we selected the charity which will benefit from all profit on the event: The SMA Trust, a children’s charity which supports vital research into finding a cure for Spinal Muscular Atrophy. In March, we announced four illustrious new speakers from the US to add to the line-up: William Browne from Tweedy, Browne, Michael van Biema, Dan O’Keefe from Artisan and Ian Jacobs from 402 Fund.

Buffett article and annual letter to shareholders
Click here for the article
Click here for the video
Click here for his shareholder letter
This article was published in Fortune as an adaption / preview of his shareholder letter, published two weeks later. This would be an excellent one to give to a teenager or someone who is new to investment; it is typical of Buffett’s ability to set out the key tenets of his successful investment strategy in very straightforward language. We have also included a slightly out of date video which we missed including in the January edition. Here, amongst other comments on the US economy, Buffett discussed the Euro situation, which today may appear somewhat less risky than it did back then although we would argue that the fundamental risks have not really changed.

The best stock fund of the decade…but not necessarily for its investors
Click here
This article, written for the Wall Street Journal in 2009, is a fascinating insight into how investors in funds are often their own worst enemies. Whilst this successful fund posted 18% annual returns, the average investor in the fund lost an incredible 11% over the same period, because they traded in and out of the fund at the wrong time. This example illustrates that being a disciplined long-term investor is just as important when you are investing in funds as it is when investing directly in equities

An interview with Anthony Bolton
Click here
Anthony Bolton has been one of the UK’s most successful long-term investors – a shining example of the out performance that can be achieved from a disciplined long-term approach to investing. In this interview, he talks candidly about the challenges he has faced with applying his style of investment in China.

Howard Marks’ history lesson
Click here
In his latest memo (March 2012), Howard Marks treats us to an enjoyable trip back through history to dissect an article entitled “The Death of Equities”, published in Business Week in 1979. This memo draws the parallel to the negativity surrounding equities as an asset class today. He sets out some of the signals that we should look for in determining that the crowd has got it wrong and we have entered the period of maximum pessimism or optimism.

The case for value investing
Click here
Here, we provide access to a detailed white paper, which presents the statistical case for value investing outside the US. Whilst long, it is a good read because it also addresses some of the drivers for the long-term outperformance of value.

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Speakers: 7th December 2017


Charles Brandes
Peter Kennan

Dawid Krige
Michelle Leung

Bingchao Cao
Chan Lee

Albert Yong
Mark Pearson

Takashi Ito
Seng Chong YEO

Adrian Warner
TJ Tan

Melvin Tan
Michael Liang

Anthony Serhan		 
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  • “We will only do with your money what we would do with our own.”
    Warren Buffett
  • “The trick of successful investors is to sell when they want to, not when they have to.”
    Seth Klarman
  • “Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.”
    Charlie Munger
  • “The stock market is filled with individuals who know the price of everything, but the value of nothing.”
    Phillip Fisher
  • “To thrive as a value investor you have to risk being called a dummy from time to time.”
    Christopher H. Browne
  • “The game of life is the game of everlasting learning. At least it is if you want to win.”
    Charlie Munger
  • “Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.”
    Seth Klarman
  • “In the short run, the market is a voting machine, but in the long run it is a weighing machine.”
    Ben Graham
  • “Rule #1: Never Lose Money; Rule #2: Never forget Rule #1.”
    Warren Buffett
  • “Confronted with a challenge to distil the secret of sound investment into three words, we venture the motto, Margin of Safety.”
    Ben Graham
  • “All intelligent investing is value investing – acquiring more than you are paying for. You must value the business in order to value the stock.”
    Charlie Munger
  • “Practical investors usually learn their problem is finding enough outstanding investments, rather than choosing among too many.”
    Phillip Fisher
  • “In theory, there’s no difference between theory and practice. In practice, there is.”
    Yogi Berra
  • “We really can say no in 10 seconds or so to 90%+ of all the things that come along simply because we have these filters.”
    Warren Buffett
  • “Whenever you find yourself on the side of the majority, it’s time to reform.”
    Mark Twain
  • “It’s not supposed to be easy. Anyone who finds it easy is stupid.”
    Charlie Munger
  • “As time goes on, I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes.”
    John Maynard Keynes
  • “Believe me, there’s nothing better than buying from someone who has to sell regardless of price during a crash. Many of the best buys we’ve ever made occurred for that reason.”
    Howard Marks
  • “Acquire Riches by Industry and Frugality.”
    Benjamin Franklin
  • “Cash combined with courage in a time of crisis is priceless.”
    Warren Buffett
  • “The Stock Market is designed to transfer money from the Active to the Patient.”
    Warren Buffett
  • “Great investors are not unemotional, but are inversely emotional – they get worried when the market is up and feel good when everyone is worried.”
    Bill Miller
  • “Contributing to . . . euphoria are two further factors little noted in our time or in past times. The first is the extreme brevity of the financial memory.”
    John Kenneth Galbraith
  • “In the world of investing, being correct about something isn’t at all synonymous with being proved correct right away.”
    Howard Marks
  • “The single greatest edge an investor can have is a long-term orientation.”
    Seth Klarman
  • “For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it’s going up.”
    Warren Buffett
  • “Buy companies with strong histories of profitability and with a dominant business franchise.”
    Warren Buffett
  • “There’s little that’s as dangerous for investor health as insistence on extrapolating today’s events into the future.”
    Howard Marks
  • “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”
    Warren Buffett
  • “Having great clients is the key to investment success.”
    Seth Klarman
  • “The focus of most investors differs from that of value investors. Most investors are primarily oriented toward return, how much they can make and pay little attention to risk, how much they can lose.”
    Seth Klarman
  • “If you want to have a better performance than the crowd, you must do things differently from the crowd.”
    John Templeton
  • “A margin of safety is necessary because valuation is an imprecise art, the future is unpredictable, and investors are human and do make mistakes. It is adherence to the concept of a margin of safety that best distinguishes value investors from all others, who are not as concerned about loss.”
    Seth Klarman
  • “As Buffett has often observed, value investing is not a concept that can be learned and gradually applied over time. It is either absorbed and adopted at once, or it is never truly learned.”
    Seth Klarman
  • “To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit.”
    John Templeton
  • “Wall Street research is strongly oriented toward buy rather than sell recommendations. There is more business to be done by issuing an optimistic research report than by writing a pessimistic one.”
    Seth Klarman
  • ‘If you don’t feel comfortable owning something for 10 years, then don’t own it for 10 minutes.’
    Warren Buffett
  • “It is easier to rationalize than it is to be rational.”
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  • “Investors have been so oversold on diversification that fear of having too many eggs in one basket has caused them to put far too little into companies they thoroughly know and far too much in others which they know nothing about.”
    Phillip Fisher
  • “Value investing is the discipline of buying shares at a significant discount from their current underlying values and holding them until more of their value is realised. The element of a bargain is the key to the process.”
    Seth Klarman
  • “Once you adopt a value-investment strategy, any other investment behaviour starts to seem like gambling.”
    Seth Klarman
  • “What the wise man does in the beginning, the fool does in the end.”
    Howard Marks
  • “You need to have a passionate interest in why things are happening. That cast of mind, kept over long periods, gradually improves your ability to focus on reality. If you don’t have that cast of mind, you’re destined for failure even if you have a high I.Q.”
    Charlie Munger
  • “Establishing and maintaining an unconventional investment profile requires acceptance of uncomfortably idiosyncratic portfolios, which frequently appear downright imprudent in the eyes of conventional wisdom.”
    David Swensen
  • “Conservative investors sleep well.”
    Phillip Fisher
  • “Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group… then to hell with them.”
    Charlie Munger
  • “Price is what you pay. Value is what you get.”
    Warren Buffett
  • “Sometimes a value investor will review in depth a great many potential investments without finding a single one that is sufficiently attractive. Such persistence is necessary, however, since value is often well hidden.”
    Seth Klarman
  • “In my whole life, I have known no wise people who didn’t read all the time – none, zero… You’d be amazed at how much Warren reads – at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
    Charlie Munger
  • “Usually a very long list of securities is not a sign of the brilliant investor, but of one who is unsure of himself.”
    Phillip Fisher
  • “Warren and I insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think. So Warren and I do more reading and thinking and less doing than most people in business.”
    Charlie Munger
  • “there are two essential ingredients for profit in a declining market: you have to have a view on intrinsic value, and you have to hold that view strongly enough to be able to hang in and buy even as price declines suggest that you’re wrong. Oh yes, there’s a third; you have to be right.”
    Howard Marks
  • “When everyone believes something is risky, their unwillingness to buy usually reduces it’s price to the point where it’s not risky at all. Broadly negative opinion can make it the least risky thing since all optimism has been driven out of it’s price.”
    Howard Marks
  • “We have two classes of forecasters: Those who don’t know – and those who don’t know they don’t know.”
    John Kenneth Galbraith
  • “Spend each day trying to be a little wiser than you were when you woke up.”
    Charlie Munger
  • “At one extreme of the pendulum – the darkest of times – it takes analytical ability, objectivity, resolve, even imagination, to think things will ever get better. The few people who possess those qualities can make unusual profits with low risk…”
    Howard Marks
  • “The harder you work, the more confidence you get. But you may be working hard on something that is false.”
    Charlie Munger
  • “…at the other extreme, when everyone assumes and prices in the impossible – improvement forever – the stage is set for painful losses.”
    Howard Marks
  • “You shouldn’t own common stocks if a 50 per cent decrease in their value in a short period of time would cause you acute distress.”
    Warren Buffett
  • “Many investors insist on affixing exact values to their investments, seeking precision in an imprecise world, but business value cannot be precisely determined.”
    Seth Klarman
  • “Greater risk does not guarantee greater return. To the contrary, risk erodes return by causing losses. By itself risk does not create incremental return, only price can accomplish that.”
    Seth Klarman
  • “Markets can remain irrational longer than you can remain solvent.”
    John Maynard Keynes
  • “…active management strategies demand uninstitutional behaviour from institutions, creating a paradox that few can unravel.”
    David Swensen
  • “Investing is the intersection of economics and psychology.”
    Seth Klarman
  • ‘Risk can be greatly reduced by concentrating on only a few holdings.’
    Warren Buffett
  • “The number of things that can go wrong (in business) greatly exceeds the number that can go right.”
    Seth Klarman
  • “Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.”
    Warren Buffett
  • “How do value investors deal with the analytical necessity to predict the unpredictable? The only answer is conservatism.”
    Seth Klarman
  • “We look for a horse with one chance in two of winning and which pays you three to one.”
    Charlie Munger
  • “I never buy anything unless I can fill out on a piece of paper my reasons. I may be wrong, but I would know the answer to that. “I’m paying $32 billion today for the Coca Cola Company because. If you can’t answer that question, you shouldn’t buy it. If you can answer that question, and you do it a few times, you’ll make a lot of money.”
    Warren Buffett
  • “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”
    Warren Buffett
  • “It is better to fail conventionally than to succeed unconventionally.”
    John Maynard Keynes
  • “You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.”
    Warren Buffett
  • “An investment in knowledge pays the best interest.”
    Benjamin Franklin
  • “Know what you own, and know why you own it”
    Peter Lynch
  • “In both economic forecasting and investment management, it’s worth noting that there’s usually someone who gets it exactly right… but it’s rarely the same person twice.”
    Howard Marks
  • “The four most dangerous words in investing are: ‘this time it’s different.’ ”
    Sir John Templeton
  • “I do not like debt and do not like to invest in companies that have too much debt, particularly long-term debt. With long-term debt, increases in interest rates can drastically affect company profits and make future cash flows less predictable.”
    Warren Buffett
  • “Skepticism and pessimism aren’t synonymous. Skepticism calls for pessimism when optimism is excessive. But it also calls for optimism when pessimism is excessive.”
    Howard Marks
  • “In investing, what is comfortable is rarely profitable.”
    Robert Arnott
  • “You can’t predict. You can prepare.”
    Howard Marks
  • “No wise pilot, no matter how great his talent and experience, fails to use his checklist.”
    Charlie Munger
  • “Wide diversification is only required when investors do not understand what they are doing.”
    Warren Buffett
  • “A hugely profitable investment that doesn’t begin with discomfort is usually an oxymoron.”
    Howard Marks
  • “There are worse situations than drowning in cash and sitting, sitting, sitting. I remember when I wasn’t awash in cash — and I don’t want to go back.”
    Charlie Munger
  • “The wise investor can profit if he can think independently of the crowd and reach the rich answer when the majority of financial opinion is leaning the other way.”
    Phillip Fisher
  • “Analysis should be penetrating not prophetic.”
    Ben Graham
  • “…it never ceases to amaze me to see how much territory can be grasped if one merely masters and consistently uses all the obvious and easily learned principles.”
    Charlie Munger
  • “This matter of training oneself not to go with the crowd but to be able to zig when the crowd zags, in my opinion, is one of the most important fundamentals of investment success.”
    Phillip Fisher
  • “Without numerical fluency, in the part of life most of us inhibit, you are like a one-legged man in an ass-kicking contest.”
    Charlie Munger
  • “All Investors should devote themselves to understanding the nature of the business and its intrinsic worth, rather than wasting their time trying to guess the unknowable future.”
    James Montier
  • “There is a complicating factor that makes the handling of investment mistakes more difficult. This is the ego in each of us.”
    Phillip Fisher
  • “The disciplined pursuit of bargains makes value investing very much a risk-averse approach.”
    Seth Klarman
  • “The successful investor is usually an individual who is inherently interested in business problems.”
    Phillip Fisher
  • “In a commodity business, it’s very hard to be smarter than your dumbest competitor.”
    Warren Buffett
  • “Because investing is as much an art as a science, investors need a margin of safety.”
    Seth Klarman
  • “Chains of habits are too light to be felt until they are too heavy to be broken.”
    Warren Buffett
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