Investment PhilosophySuperinvestorsThink Differently

James East of Mercertus Capital on How He Achieved Big Returns

One of the things I’ve discussed a lot on this blog is the investment process. Another thing I’ve discussed is some ideas I have on how to achieve significant results. As I’ve mentioned before, one of my favorite quotes is from John Templeton “If you want to have a better performance than the crowd, you must do things differently from the crowd.”

I think that although the concept of being a contrarian is very familiar with most investors, it is often brushed over and not really studied. Most investors understand the logic and value of being a contrarian, but when it comes to their actions, they very often mimic the majority of investors. This is human behavior and it is very difficult to go against.

One thing I’ve mentioned before is that it has been very beneficial to me to make a short list of the very best investors who have achieved huge returns over time (20-30% or more over a long period of time). The list includes my top 4 investors: Buffett, Graham, Schloss, and Greenblatt, all who achieved 20%-40% returns over 20 years or more. But it also includes many smaller investors who are not household names.

One such investor is James East of Mercertus Capital. James has a fund that has achieved around 25% annual returns for the past 10 years. The video below is a short 10 minute clip of him discussing his ideas on investment philosophy and process. Notice how simple his ideas are. The key is how he implements those ideas.

It is very important to study the investment processes and philosophies of these investors. If you do that, you’ll notice some unique aspects of their processes. Most of the time, I can trace these results to two main categories. Concentration of investments on just a few situations that are determined to be very attractive on the basis of valuation and/or quality, or Diversification on a number of very cheap stocks that are often hated among the majority of investors, including most value investors.

I’ll post a list of things that many of these top notch investors have in common in the near future. For now, here is the video of James East talking about his investing ideas.

5 thoughts on “James East of Mercertus Capital on How He Achieved Big Returns

  1. What annoys me is this:
    Such ideas avoid the hassle.
    The REAL truth about these guys are:
    1) ACCOUNTING SKILLS. They can read a balance sheet or an annual report – in their sleep.
    Can you do that? I can’t!
    2) STUDY. Some of us may picture Graham and Buffett in New York. These guys worked their a$$e$ off. They both got divorced!
    Yes. To achieve extraordinary results, you have to give up a part of your life. Graham says that in Intelligent Investor.
    What is REALLY human nature is the desire to get the results without the sacrifice.
    Now THAT’S the (unpopular) truth.
    Take the kids to the game or study?
    What these super-investors did was SACRIFICE. There didn’t have to sacrifice after they were rich. But study their lives and at some point, they sacrificed – hence the divorces.

    1. Hi Donald. Yes, I completely agree–hard work is one of, if not the most important factor in investment success.

    2. Hard work and TALENT, or “aptitude”. No amount of hard work will enable me me to play basketball like Michael Jordan. No amount if hard work will let me sing like Ella Fitzgerald. And no amount of hard work will let me crunch numbers, in my head like Warren Buffett. It may HELP and I should try my best but I should NOT get sucked into the “anybody can be a super-investor” trap. I don’t have that aptitude. The self-help books don’t say: “results depend on aptitude”. The books suggest “anybody can do it”, which is false. Anybody with uncommonly-high aptitude MIGHT succeed. Thanks

      1. People, quite expectantly, seek a “secret” or shortcut to compensate for their talent deficiency. Sorry for so many posts. This gets to me. There’s a whole industry out there thriving on “anyone can do it”. That’s false.

        1. Yeah, those are good points. I do agree that the “anyone can do it” isn’t necessarily true. But I think the reason for this is not talent, but willingness to put in the time. It is absolutely true that Buffett, and other superinvestors like him, are in a league by themselves. Buffett is a genius, and just like Mozart, some things are innate. However, I think investing is a skill that can be learned, and I think with just an average amount of intelligence, proficiency at this trade can be achieved. And a proficient investor can actually do quite well. The missing ingredient most of the time is either unwillingness to do what it takes (lack of persistence and hard work), or behavioral flaws (doing the wrong thing at the wrong time). I think one of these two things are almost exclusively responsible for why most investors fail. Occasionally talent might hold you back, but most likely it will be one of the other two pitfalls.

          So it depends on what you’re trying to do. If you’re trying to be Buffett, then yes, you’ll likely fall short because you don’t have his talent level. But Walter Schloss had a high school degree, and he was no genius, but he did have the proper temperament and work ethic to achieve outstanding (if not Buffett-esque) results.

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