John Moody’s 1906 classic is a guide to the hazards, mistakes, and lessons of investing in the early 1900s. It’s a detailed account of how much, and yet how little, investing has changed over the last century.
There are averages but relying too much on the “average” can lead to ruin. And uncertainty is behind it all.
A good example of this was laid out in an old book about making investment decisions on drilling oil wells. It turns out, wildcatting is a risky endeavor.
A wildcatter can gather every bit of information possible but they’ll never be certain if there is oil under the ground until they drill. The key to successfully drilling oil wells is to not bet so much money on any single well that a string of bad bets ruins you. Continue Reading…
The Berkshire Hathaway annual letter was released this past weekend. It was one of Warren Buffett’s shortest letters to date.
But it wasn’t without a few lessons. As usual, Buffett scattered several lessons and reminders for investors throughout. The lessons were just briefer than normal. Let’s dive in.
Buy Businesses, Not Pieces of Paper
Whatever our form of ownership, our goal is to have meaningful investments in businesses with both durable economic advantages and a first-class CEO. Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers.
Buffett makes two important points. He’s not trying to profit off of short-term swings in the market. He knows market timing is a fool’s errand. Continue Reading…
Every investment brings with it a range of potential outcomes. That range is wider or narrower depending on the investment. Somewhere in that range sits a most likely outcome. And knowing the most likely outcome helps with making investment decisions.
Of course, the most likely outcome isn’t guaranteed to happen. For example, if the most likely outcome has a 70% chance of success, it means there’s a 30% chance something else happens. So what if that something else happens?
As Peter Bernstein makes clear, in an old interview with Jason Zweig, knowing the consequences is the most important part of understanding risk: Continue Reading…
Walter Schloss started as a runner on Wall Street in 1934. By 1940, he had taken a couple of courses taught by Ben Graham. Which led to him working under the master at Graham-Newman. Then Schloss started his own partnership in 1956 after Graham-Newman shut down.
Warren Buffett described Walter’s investing style this way:
Walter has diversified enormously, owning well over 100 stocks currently. He knows how to identify securities that sell at considerably less than their value to a private owner. And that’s all he does. He doesn’t worry about whether it’s January, he doesn’t worry about whether it’s Monday, he doesn’t worry about whether it’s an election year. He simply says, if a business is worth a dollar and I can buy it for 40 cents, something good may happen to me. And he does it over and over and over again. He owns many more stocks than I do — and is far less interested in the underlying nature of the business; I don’t seem to have very much influence on Walter. That’s one of his strengths; no one has much influence on him.
Schloss’s genius was that he knew himself well to build a strategy that fit himself perfectly. He knew what he understood (avoided what he didn’t understand), his risk tolerance, and his personality. And he kept it simple.
Charlie Munger answered questions at the Daily Journal annual meeting this week. There’s always something to learn from the 98-year-old investor.
Though, one of the few downsides of these meetings is the repetitiveness from year to year. Thankfully, the questions were moderated. That helped mix things up a bit. Which led to better answers.
While the entire Q&A session is worth watching (linked below), I highlighted a few of those lessons below. Continue Reading…