Case Studies

Importance of ROIC Part 5: A Glance at the Last 42 Years of Wells Fargo

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“Experience, however, indicates that the best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago… a business that constantly encounters major change also encounters many chances for major error. Furthermore, economic terrain that is forever shifting violently is ground on which it is difficult to build a fortress-like business franchise. Such a franchise is usually the key to sustained high returns.”   –Warren Buffett, 1992 Shareholder […]

Investment Philosophy

Importance of ROIC Part 4: The Math of Compounding

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I thought I’d circle back to discuss the topic of compounders and return on capital. I wrote a few posts about earlier this year, and there have been numerous comments and questions. In this post, I want to discuss the actual math behind the compounders, to try and show why return on capital is so important to long term business owners (which is what we are as stockholders). To recap what I mentioned earlier, I usually put investments in two broad […]

Charlie Munger

Circle of Competence, Fat Pitches, and How To Become the Best Plumber in Bemidji

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“The way to win is to work, work, work, work and hope to have a few insights.” – Charlie Munger I came across a post on one of my favorite sites (Farnam Street) about Buffett on some fundamental keys to successful investing. I’ve always thought the most important aspect of investing is waiting for the proverbial “fat pitch”. As readers know, I’m a baseball fan (I love the game, and I love the numbers that are part of the fabric […]

Case Studies

10 Years of Google and the Importance of Long Term Thinking

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“Google has a huge new moat. In fact, I’ve probably never seen such a wide moat.” – Charlie Munger, 2009 Google celebrated the 10 year anniversary of its IPO last week. Google is a company that I’ve never owned (unfortunately), but really admire. There are a few businesses I almost root for, like a fan of a football team. Costco, Fastenal, and Walmart among others are on the list. These are really high quality businesses that have made their shareholders wealthy […]

Case Studies

Buffett’s PetroChina Investment: Finding Large Gaps Between Price & Value

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“You don’t have to know a man’s exact weight to know that he’s fat.” – Ben Graham I was reading through some notes from the 2008 Berkshire Hathaway Annual Meeting and one of the questions grabbed my attention. The question was pertaining to Warren Buffett’s decision to purchase stock in PetroChina back in 2002. Basically, the questioner was surprised that Buffett made such a sizable investment after a seemingly small amount of due diligence saying “all you did was read the annual report… […]

Education

Importance of ROIC Part 3: Compounding and Reinvestment

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“We prefer businesses that drown in cash. An example of a different business is construction equipment. You work hard all year and there is your profit sitting in the yard. We avoid businesses like that. We prefer those that can write us a check at the end of the year.” -Charlie Munger, 2008 Berkshire Hathaway Annual Meeting I’m patiently looking for bargains everywhere. That’s the name of this game: “figuring out what something is worth and paying a lot less […]

Ben Graham

Buffett’s Early Investments

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“The highest rates of return I’ve ever achieved were in the 1950’s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.” – Warren Buffett, 1999 Most Buffett fans have seen that quote. I recently had a few questions and comments that […]

Ben Graham

Net-Nets: A Riddle Wrapped in Mystery Inside a Cigar Butt

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I received a couple questions/comments from readers lately regarding Buffett and some previous comments I made on strategy before and after the Berkshire annual meeting. I always enjoy interacting with readers. The vast majority of my days are spent researching new investment ideas, so I can’t always respond to everything, but please feel free to email me questions/comments to john@sabercapitalmgt.com. I read all my emails even if I don’t always have time to respond. When possible, I’ll respond individually, or […]

Charlie Munger

Some Thoughts on the Berkshire Hathaway Annual Meeting

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I had a great time in Omaha this past weekend. I got to meet with a couple clients, reconnect with some like-minded value investors, and meet some new friends as well. And of course, being in the same building with two of the greatest investment minds in history is something special. I wanted to make just a few comments on a couple things in my notes from the weekend. This is by no means a comprehensive summary—and there are many […]

Investment Philosophy

Summary Thoughts on Investment Approach

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One of the most common questions I get from readers as well as clients involves my overall investment philosophy. I talk about this often with clients, but I thought I’d write some comments specifically pertaining to my own investment philosophy and a few aspects of my approach that I think are of central importance. Below are some points that help describe my investment philosophy. Strategy My firm has a simple investment objective: to compound our capital at high rates over […]