Education

1987 Berkshire Letter and Buffett’s Thoughts on High ROE

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I am in the midst of writing a few posts on the importance of Return on Invested Capital (ROIC). I wrote two posts last week discussing Greenblatt’s formula and some thoughts on the topic (Here and Here). I’ll have one or two more posts next week discussing a few brief examples of compounders (companies that exhibit unusually high returns on capital over extended periods of time, allowing them to grow–or “compound”–shareholder value over long periods of time). There always seems […]

Ben Graham

A Lesser Known Gem by Ben Graham

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Ben Graham is known largely for writing two of the most cited books in the field of value investing. Of course, in addition to being an outstanding writer and educator, he was a proficient practitioner of the investment field as well—a dual distinction that is extremely rare. In other words, he didn’t just preach, he practiced as well. And he did both at a very high level. His investment record was excellent—he averaged gross returns around 20% per year in […]

How to Improve Results

Quality Screens: Part 2

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In Part 1 of this post, I looked at some quality screens I look at occasionally to generate ideas. In this second part of the post, I thought I’d briefly review an industry specific screen that I put together more recently that I will make a point to review every month or so. I’m doing a lot of work on bank stocks lately, looking at a lot of cheap stocks selling for significantly less than their tangible book value. I’ll […]

How to Improve Results

Quality Screens: Part 1

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“(The Intelligent Investor) taught me how to think about a stock and the stock market. It taught me the market was there not to instruct me but to serve me. – Warren Buffett, 2013 Berkshire Hathaway Annual Meeting Ben Graham taught us that it is crucial to make Mr. Market our servant, not our master. Buffett once said if he taught a business school program on investing, he would have just two classes: How to Value a Business, and How […]

Books

How Warren Buffett Thinks About Risk

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“Rule #1: Don’t Lose Money….” The best book I’ve ever read on Buffett is Alice Schroeder’s Snowball. I remember picking up my copy about four years ago and literally not being able to put it down. I read it for hours at a time, all the while marking pages and circling things… and I often reference certain parts of the book when thinking about investments. The book goes much deeper into Buffett’s thought process than most of the other Buffett […]

How to Improve Results

How I Filter Investment Ideas

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My investment process can be divided into two main categories: Idea generation Investment research and due diligence These are the two areas that I spend the vast majority of my investment time (portfolio management and execution is a distant third). There is a lot of information in the value investing public domain on how to determine the quality or degree of undervaluation of various securities. There isn’t as much information on how to think about the actual search process. In […]

Case Studies

Thinking Differently: The Most Important Contrarian Behavior

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“I skate to where the puck is going to be, not where it has been.”  – Wayne Gretzky One of the most important skills that you can develop as an investor is the ability to think differently. This is a broad topic with many interpretations. I often talk about thinking differently here at BHI. When it comes to general philosophy or “investment theory” (as opposed to thinking about individual stock investments), I spend more time thinking about this topic than […]

Case Studies

The Best Way to Improve Investment Skills: “One Case Study After Another”

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I do a lot of case studies. I recommend that any burgeoning value investor do as many case studies as they can, sprinkled in among reading annual reports and other filings. I’ll explain what I mean by this in a moment… first I thought the best investor/teacher of all time could explain the importance of this exercise better than me: “To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, […]

How to Improve Results

Buffett vs Munger vs Schloss and Thoughts on Portfolio Strategy

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I was having a conversation about Munger’s philosophy vs Schloss’ philosophy and had a few thoughts (and below I’ll compare their performance results against Buffett’s)… I often like to look at long term past performance of investors (10 years or longer) to draw conclusions about the effectiveness of their investment approach. I’ve often discussed on this site the many value investors out there with average returns. I used to ask myself ‘how can their returns be average when they clearly […]

How to Improve Results

My Investment Checklist

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A few different readers have asked about checklists and whether I use one. I have started to recently, and have found it helpful. A year or two ago I heard Mohnish Pabrai talking about the Checklist Manifesto, and how he implemented his own checklist into his investment routine. Pabrai made an analogy to pilots, who go through a detailed checklist just prior to a flight. Using a checklist can help you catch something you didn’t check or didn’t think about. […]