Value Invest London

July 2012

July 2012     Issue 10


An Interview with Howard Marks on Bloomberg
Oaktree Capital, founded by Howard Marks, manages $77 billion, investing mainly in distressed debt, real estate, and corporate debt. In this interview, Marks sets out his belief that it is impossible to get macro calls consistently right, and equally impossible to time purchases so that they are at the bottom of the market.  He discusses the long-term returns currently on offer from the US real estate market and comments on the investment management process, quoting Charlie Munger:  “None of this is meant to be easy and anyone who thinks it is is stupid”.

Keynes: an outstanding investor
John Arthurs of the FT (you may need to register to view it) writes an interesting overview of some work undertaken by Elroy Dimson and David Chambers to look at the superb track record of Keynes whilst investing the Kings College Endowment Fund. The article compares his track record against other investors and discusses his contrarian investment approach and his conclusion that the “right method in investment is to put fairly large sums into enterprises one thinks one knows something about”.

Boring is good
This article written by Lucy Kellway for the FT (you may need to register to view it), addresses a similar point to one which was made in an article we included in a previous edition of the Value Investor Digest that “boring managers” make good business leaders.  We strongly believe that managers who are very focused, detail oriented and low on ego are much more likely to look after our capital sensibly.

Warren Buffett interviewed in Sun Valley
In this interview in early July, Buffett comments on the first green shoots he is seeing in the US housing market, on flatter growth in other US businesses over the last couple of months, and a more negative trajectory in Europe.

“The Oracle of Boston”: Seth Klarman
An excellent overview in the Economist of one of the investors we respect most.  What is perhaps most impressive about Klarman’s 30 year history of delivering c20% annual returns is that he often holds a lot of cash – currently 30% – and his mantra is to focus first and foremost on avoiding loss, preferring to be in cash and wait until he finds very high probability returns. We follow a similar approach: unless we find a sufficient margin of safety in our potential investments, we prefer to hold cash. This is the natural result of our bottom-up investment approach rather than an attempt to time markets.

A new book on Benjamin Graham
This brief book review in the Economist introduces a new book which has been added to our reading list:  “The Einstein of Money: The Life and Timeless Financial Wisdom of Benjamin Graham” by Joe Carlen. The article itself provides a brief overview of the impact of this great investor – the pioneer of value investing.

Commodities, Windfalls and Capital Misallocation
This article is written by an Indian value investor we know and covers a current bubble in guar, a bean which is farmed in Rajasthan – the price has risen 6 fold in under a year.   The article set outs the impact of the price rise on the community and draws parallels with another agricultural bubble. The article illustrates the difficulty we have always had with businesses that are entirely dependent on commodity pricing.

The London Value Investor Conference – 2013
The organisers have started working on plans for next year’s event and will be announcing the date soon.

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  • “It’s very much the Rolls-Royce of the investor conference market”
    Paul Scott, Stockopedia
  • “The people in that room were a more powerful cadre of the powerhouse of investment than has been gathered for a very long time”
    Jonathan Ruffer, Ruffer LLP
  • “It’s kind of like Glastonbury isn’t it, for the Value Investing community”
    Nick Train, Lindsell Train
  • “What I like about it is that it is a practitioners conference and it’s an opportunity to come and hear from your peers about the work that they are doing and how they see value investing”
    Hassan Elmasry, Independent Franchise Partners
  • “I think people really look forward to it and enjoy it. There’s a good bunch of people here who have travelled a reasonable way – the speaker after me was from Hong Kong and there’s a big Canadian crew and a big US crew – people come from around the world to see this”
    Nate Dalton, Affiliated Managers Group
  • “If somebody’s already been through that process of seeing what the conference is about and then is willing to pay their money for the effort of coming here, that’s a great filtering process.”
    Gary Channon, Phoenix Asset Management
  • “The conference has become a part of the furniture of the London scene. You can discover that is what lies inside you – that you are innately a value investor.”
    Richard Oldfield, Oldfield Partners
  • “I do speak at a fair number of conferences to investor bases, this one is really quite a good list – some very, very good investors present and some very interesting speakers”
    Jon Moulton, Better Capital
  • “Definitely worth it and I know a number of people who have ‘ummed and arred’ about coming along and I’m sure that they will be regretting that they didn’t come today – and it’s only going to get better as far as I can see”
    Tim Green, Private Investor
  • “Having sat through the whole day as I wanted to come and hear all of the speakers – I’ve been really impressed by the quality”
    Anthony Bolton, Fidelity
  • “I’ve got a bunch of business cards to add to my collection and some folks I’ve been looking forward to meeting, plus some firms I didn’t even know existed but sound really interesting and I’m looking forward to building on that relationship base”
    Mason Morfit, ValueAct Capital
  • “You couldn’t find that anywhere else really, where you’re speaking to the principals who have been voted on to the Board [of Microsoft] to effect change”
    David Shapiro, Willis Towers Watson
  • “What I was impressed with is, because the subject is very similar, value investing, they found a variety of ways of attacking the same subject. I was also very impressed, having done this in another location, of seeing them stay on target time-wise so that it moves along at a great pace and I think the audience is greatly rewarded by that discipline”
    Don Yacktman, Yacktman Asset Management
  • “Very well organised and it was a treat for investors like us to hear some great speakers”
    Roli Saxena, Drona Capital
  • “I came last year and I liked it so much that I have been looking forward to today ever since”
    Dominique Levy, Sonian Capital
  • “We’e got a very sophisticated audience who are used to value investing – I think this is a good audience”
    David Samra, Artisan Partners
  • “The profile of the speakers is one of the main reasons that I came”
    Niels Borgen, Private Investor
  • “When you look at the ideas speakers have put forward in previous years and how they have performed over the last few years, they’ve done very well – if that performance continues it would be quite remarkable. It does show that you can pick up some good ideas at a conference of this sort”
    Jonathan Mills, Metropolis Capital
  • “I came last year as well and I thought that it was the most outstanding event that I have been to”
    Leon Boros, Equity Strategies