General Thoughts

General Thoughts on Portfolio Management and Diversification

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“Ship your grain across the sea; after many days you may receive a return. Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.” –Ecclesiastes 11:1-2 Investors have always discussed and debated the merits of diversification—apparently even as far back as the days of King Solomon (although his definition of diversification—7 or 8 “ventures”—might not sit well with modern day portfolio theory and mutual fund managers who often hold 30, 50, or 100 […]

Investment Philosophy

Value Investing: Luck vs Skill Part 2

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Earlier this week I responded to a comment that centered around the role of luck in long term outperformance. Feel free to read my response to the comment in Part 1 of this post where I list the #1 main reason why most people don’t replicate the results of Walter Schloss. It’s a very simple reason demonstrated by the results of Schloss himself. Today, I’ll discuss luck in Part 2 of this post. Does Luck Play a Role in Great […]

General Thoughts

Value Investing: Luck vs Skill Part 1

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I received this interesting comment from a reader and thought I might write a post or two on this topic: “…There is one very important writer/thinker you do not mention in your site but whom you might want to pay attention to–the Nobel prize winner Daniel Kahneman. After reading him, you will recognize and appreciate the role of luck, the unpredictability of stocks/markets, and that very few people, if any, can beat the market over the long term. Sure you […]

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 […]

Ben Graham

Thoughts on Finding Value When Stocks Are Making New Highs

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I’ve been traveling for the last two weeks, and thus the reason for the lack of posts. But I’ve been working and reading as usual, and actually have been active in making a few investments, despite the overall market climbing to new highs. I’ve mentioned this before, but it’s worth saying again… I put almost no emphasis on what the overall market is doing and where the indices are. I simply look for undervalued stocks. But regardless of the methods […]

Think Differently

The Concept of Idea Inventory and Cheap Parts of the Market

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I divide my time into two main areas: business development (this includes networking, meetings, discussing ideas with prospective investors, etc… basically everything it takes to run my business) and investing. In the latter category, the majority of my time is spent doing two things: idea generation (building watchlists, reading, screening, etc…) and researching (going through items I’ve placed on my watchlist in greater detail). So investing is a never ending interplay between getting ideas and researching ideas. I think of this general […]

Investment Philosophy

Walter Schloss 1973 Forbes Article & Two Ways to Outperform the Market

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I just read an old Forbes piece on Walter Schloss: Making money out of junk. As many regular readers know, Schloss is one of my all time favorite investors. Read more about Schloss on my resource page and also check the Walter Schloss category. He made 21% per year for 47 years, investing in a simple, methodical, low stress manner working 9-4:30 with no other employees or assistants other than his son Edwin. Here are some key takeaways from the […]

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 […]

Investment Philosophy

Cheapness is an Excellent Catalyst

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I group my equity investments into three main categories: Compounders (These are Warren Buffett “forever” stocks, or franchise businesses with durable competitive advantages that I’m willing to hold for a long time as long time as long as the business continues to compound cash flow, dividends, and intrinsic value.) Cheap and Good (These are stocks that are not as high quality as the compounders, but are still above average businesses producing good returns on capital but are for some reason […]

Motivational

Who is Walter Schloss?

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Everybody has heard of Buffett. Every value investor knows Graham. But Walter Schloss is a man that for most of his life, despite putting up one of the all time great track records, spent most of his life under the radar. I suspect he liked it that way. Many value investors have extensively studied Schloss and his methods, but there are still many who have not heard of him, or haven’t read much about him. Schloss passed away last year […]