Who is he?
portfolios (.pdf format - Adobe Acrobat necessary to read) What articles has he
published on management? Preparing your children for
success. (in Romanian) Examples of Websites created,
maintained, and promoted:
Investment portfolios (.pdf format - Adobe Acrobat necessary to read)
What articles has he published on management?
Preparing your children for success. (in Romanian)
Examples of Websites created, maintained, and promoted:
How my investment techniques compare to those of Warren Buffett, Part 1Click here to add this page to your favorites folder!
Conclusion and charge
Apologies to the expert
Warren Buffett is one of the most successful investors in
history. The danger of the title I have given this article is that the
reader may think I have the audacity to believe I am in the same league
as he is. I have much respect for him and would be satisfied with my
talents being in the same order of magnitude as his. One book of required reading for any investor is The Essays of Warren Buffett: Lessons for
Corporat America by Lawrence A. Cunningham (which page numbers are
referred to below). Although there are some differences in our
thoughts and I learned a lot from the book, I was amazed that my
techniques align so well with his. This helps explain my excellent results
over the past couple of decades of bull and bear markets. (Click the logo to the left for details.)
If you want a long-term positive relationship with your investment advisor, I am convinced that you must understand a certain amount about his or her methods. Surprises are often not fun if it involves your money. My results will likely fall short of Mr. Buffett's, and perhaps they will sometime stop outpacing the market as they have done for decades.
I write this because good results come from good procedures. I
enjoy the intellectual process of finding a new movement, a good
company, and good management far more than the proceeds from beating the
market and doubling its returns, though my clients and I have learned to
live with those also. In searching for the right purchases, like Warren
Buffett, I "adopt the same attitude one might find appropriate in
looking for a spouse: It pays to be active, interested, and
open-minded, but it does not pay to be in a hurry." p. 149 And in
investing, just as I learned in Little League Baseball, to put runs on
the scoreboard I must be more interested in playing than watching the
Going against the flow
Professionals will try to tell you the market is no place for
the small fry like us. We disagree and have shown for 30 years that
this is the perfect place for David to beat Goliath. As opposed to in
the Bible, on Wall Street, Goliaths are always getting beaten by Davids
but there are too many Davids for the media to cover, so they choose the
Goliaths like Enron, WorldCom, etc. The problem is that when an
individual manages his portfolio, he is too emotionally engaged like the
others in the game. If you buy when everyone else is buying, the price
will be high. If you are emotionally detached from your portfolio by
having someone else manage it for you, you will do much better. "A
recent study by researchers at Carnegie Mellon, Stanford and the
University of Iowa found that people with stroke- or disease-induced
damage to the emotional areas of the brain outperformed those with
undamaged brains in an investment game, because emotions didn't get in
the way of their market calls." (Fortune "A meditation on risk"
October 3, 2005 p. 50)
I don't believe in the presently popular inefficient market theory that all the good and bad news is always immediately calculated into the value of the stock. This is why our results are so good. As Buffett says, "What could be more advantageous in an intellectual contest--whether it be bridge, chess, or stock selection--than to have opponents who have been taught that thinking is a waste of energy?" p. 63 "Most men would rather die than think. Many do."---Bertrand Russell.
Regardless of your portfolio size, I think it is best to own stock in about 10 companies. Records show that I make better decisions than most professional money managers, but it is too hard to analyze and make hundreds of good decisions, so I try to make about a dozen a year. I agree with Buffett that conventional wisdom of holding a mutual fund of 100 companies is not proper diversification. If I can identify 5-10 reasonably-priced companies that I understand, that are well run and that have long-term competitive advantages, this is proper diversification. Conventional professional investors do the reverse, trying to anticipate what other people will want to buy instead of what is serving the public with quality products and services that they will demand for years to come.
I tend to be conservative and not take positions in companies or industries that I don't understand or don't see the value in just because everyone else is making money there. This is demonstrated by my positions during the dot-com boom. People were making lots of money on stocks of companies with little hope of making a profit. I didn't understand this mentality. It makes little sense to me to risk the finances my friends have and need in order to try to earn what they don't have and don't need. In the peak of the technology boom at the turn of the century, my positions were in real estate, housing construction, gold, and finance stocks. These rose while tech fell. We may not be able to replicate this in the future, but if you are looking for someone to earn money on high-risk investments, you should probably look elsewhere.
Unlike mutual fund managers, I focus more on long-term returns, so when a company's market price falls for no good reason, I will tend to hold on to it or even purchase more. Likewise, I don't do the popular "window dressing" of stocking my clients' portfolios with the high-flying stocks so that it looks like I have them "in the party." If we have missed the party, we'll wait for the next one instead of going in at the end when there is nothing left but a mess to clean up.
Hopefully, I will be underweight in stocks when everyone is buying and the stock market is expensive and will be loading up when everyone is selling. This might unnerve you but it is no different than buying a house when the price is cheap and selling when the price is expensive. Or as Wayne Gretzky advised, "Go to where the puck is going to be, not to where it is." Since I like serving customers, even the ones that don't subscribe to my services, I try to oblige them by buying when the most people want to sell and selling when the most people want to buy. Like Buffett, I welcome change, crashes, and crises and "attempt to be fearful when others are greedy and to be greedy only when others are fearful."
If the market is undervalued, we would like to have a portfolio with a beta greater than 1. If the market is overvalued, we want to have a portfolio with a beta less than one or even negative.
Warren Buffett's standards for investing in a business are also ours. In his 1977 annual report he wrote, "We want the business to be one (a) that we can understand; (b) with favorable long-term prospects; (c) operated by honest and competent people; and (d) available at a very attractive price." p. 86
Conclusion and charge
Write me at if you would like to discuss my managing your portfolio. Minimum $100,000.
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