How to Improve Results

Three Categories of Risk to Keep in Mind When Investing

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Warren Buffett said there are just two rules of investing: #1-Don’t Lose Money; #2-Don’t forget rule #1. That’s a tongue in cheek oft used phrase, but worth remembering at all times. But it begs the question: how exactly do you “not lose money”? One thing to do is create a checklist… this is something that I heard Mohnish Pabrai discuss a couple years ago and I’ve recently implemented this in my own process, which seems to make the decision making […]

General Thoughts

How To Determine a Good Investment

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I just wrote this post on my investment process and the idea of using screens. I found it interesting that Buffett doesn’t even consider screens as a tool. I think most of the reasoning is that he doesn’t use technology much, but other reasons include the sheer size of his investment portfolio and the fact that since the 1980’s he has become much more of a business investor interested in the qualitative aspects of a business. He is much more […]

General Thoughts

Idea Generation: Reading vs Screens

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I thought I’d write down some quick notes regarding my investment process today… This is a topic I write and think about a lot. Having a defined investment process is essential to staying focused and being able to methodically generate long term investment results. Buffett Reads, He Doesn’t Screen I read a lot about the Berkshire meeting last weekend, and I have a few friends that attended (I’m anxiously awaiting their first hand accounts). At the meeting, Buffett discussed how […]

How to Improve Results

Think Differently: Buying Cheap Stocks is Difficult

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“If you want to have a better performance than the crowd, you have to do things differently from the crowd.” –John Templeton The above quote is one of my all time favorites. It’s a ubiquitous concept: we hear it all the time…. buy what others are selling, buy fear, sell euphoria, etc… The quote represents obvious importance. But the interesting thing is that although it’s an oft used phrase, it is practiced much less often than you might realize. Taking a […]

How to Improve Results

Five Minute Stock Checkup

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With around 10,000 stocks to choose from when making investment decisions, you need to have a way of narrowing down the universe to a manageable number to perform more detailed research on. I’ve discussed my investment process a bunch in past posts, and I’m always looking for ways to make my routine more efficient. I basically use Value Line, screeners, 13-F’s, and other blogs for ideas on specific investments. I then put all my potential stock ideas onto a couple […]

How to Improve Results

How to Filter Good vs Poor Companies in the Cheap Universe

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One of my readers who is interested in learning more about the fundamentals of value investing emailed me the following question: “I get the idea of buying undervalued stocks but how do you know if they are undervalued or just junk that you wouldn’t want to invest in?” This is one of the key questions that every value investor deals with. And investors approach this question in various ways. Every value investor wants a bargain, and every value investor says […]

How to Improve Results

Invert, Always Invert: Where do Investment Returns Come From?

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Yesterday I wrote a post that started with a quote that Charlie Munger has often used: “Invert, Always Invert.” The idea is to think differently than the crowd. Ben Graham said that our results are based on our methods, not whether the crowd agrees with us or not. However, the structure of the market is such that thinking in a contrarian way often leads us to areas that offer greater investment results. I believe that contrarianism is a necessary, but […]

Ben Graham

Invert, Always Invert: More on Thinking Differently

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“Invert, Always Invert.” -Carl Gustav Jacob Jacobi, 19th century mathematician, using the phrase to describe how he thought many problems in math could be solved by looking at the inverse. Charlie Munger often uses this same quote to express how investors can likewise benefit by looking at the inverse, or opposite, of what others are looking at.  Yesterday I wrote a post on Buffett and how he achieved 50% returns, and “guaranteed” that he could replicate those returns on a […]

General Thoughts

How Buffett Made 50% Per Year? By Thinking Differently…

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A few years ago at the Berkshire Hathaway Annual Meeting, Warren Buffett said something very interesting. He said that he personally knows of a half dozen or so people who could make 50% per year managing a relatively small amount of money. I came across a reference to this comment a few days ago and I began thinking to myself: I wonder who those 6 people are? But even though it’s interesting to consider, there are more important takeaway’s from […]