Buy the Book: Natural disasters shape the planet in many ways. The Big Ones details some of the biggest natural disasters in human history, how people were impacted, and how they responded to the randomness of each event.
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Lessons from the 2021 Berkshire Meeting
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The broad lesson from this year’s Berkshire annual meeting is that successful investing is hard. Especially when it appears to be easy.
Of course, that will likely be the lesson when we look back on this period a decade from now too. But until then, Warren Buffett and Charlie Munger will again be labeled “old and out of touch” with the new reality.
Before diving in with the lessons, here’s a quick tip: if you want to listen to the entire meeting, bump the speed up to 1.2x or higher. It goes by faster and Buffett and Munger sound 30 years younger.
Let’s dive in.
It’s hard for companies to stay on top.
Buffett showed a list of the 20 largest companies, by market cap, in the world today. Continue Reading…
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The Theory of Stock Exchange Speculation by Arthur Crump
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Arthur Crump warns of the many obstacles, behavioral and otherwise, speculators face in the markets. The 1874 classic sits as another example that speculating has been a difficult endeavor for a very long time.
The Notes
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Howard Marks: The “Negative Art” of Investing
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Howard Marks once describes his investment philosophy like this:
My philosophy of investing was built primarily on experiences but also on things I read: John Kenneth Galbraith’s ideas about cycles, the importance of contrarianism and being a countercyclical, and the importance of not being a forecaster, and Charlie Ellis’s article on “The Loser’s Game” — the desirability of just keeping the ball in play rather than trying to hit home runs.
Strategies that swing for the fences can experience random catastrophic strikeouts that ruin a game. Marks wants to stay in the game as long as possible, so he’ll forgo home runs for singles, doubles, and even walks. It’s like a small ball approach to investing, to continue the baseball analogy.
The point is, Marks wants to avoid as many mistakes as possible and not lose. To do that, he follows a process he learned from Ben Graham called the negative art. Here’s how he described it: Continue Reading…
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Peter Lynch on Portfolio Construction
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Peter Lynch is known for his versatility. He deployed a wide range of strategies during his career to earn market-beating returns.
As described in his book, One Up on Wall Street, he’d invest in anything — slow growers, stalwarts, fast growers, cyclicals, turnarounds, and asset plays. He even borrowed Ben Graham’s net-net strategy to invest in Dot-com stocks after the bubble burst.
But how did he put that skill to use regarding portfolio construction?
In a 1985 interview, he described how he constructed the Magellan Fund. Lynch divided the fund into three buckets — conservative stocks, growth stocks, and special situations: Continue Reading…
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Seth Klarman: Consistency in a Bubble
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Imagine writing out your investment strategy every year. What would it be? Would it be consistent? Or would it change every few years?
Now, imagine writing it down during the longest bull market in history. Would it change then?
Fund managers do this almost annually to remind clients, partners, or shareholders about the underlying goals of the fund. On some level, it probably acts as a self-reminder, offering reassurance that their strategy does work, just not right now. And looking back, it becomes a telling sign of whether they stayed consistent, especially during the rough years.
Seth Klarman’s letters are a good example of consistency. His letters not only show what it takes to stick to your knitting but to do it in the face of a massive bubble that makes your strategy look foolish. Continue Reading…
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