Here’s what I’ve been reading the past three months: Continue Reading…
Lessons from Seth Klarman’s Margin of Safety
Seth Klarman’s Margin of Safety is a rare and elusive book that sells for a huge premium over its IPO original price. It’s a book about managing risk and its title is the key to it all.
Klarman follows a value investing philosophy influenced by Ben Graham — buying something for less its worth.
What’s unique about Klarman’s book is the updated views relating to his own experiences prior to publishing in 1991. There are chapters dedicated to junk bonds, institutional investing and the short-term performance race, thrift conversions, looking for catalysts, and distressed/bankrupt securities. He also covers the basic value philosophy.
I pulled eight of the bigger lessons (there are more) from the book to share. If you can get your hands on a copy, it’s worth the read. Continue Reading…
The Teledyne Buyback Effect
Henry Singleton was one of the best capital allocators and Teledyne was his masterpiece. Stock buybacks were a big part of its success.
Singleton started Teledyne in 1960 but its story really begins in 1965. That’s the year its stock jumped from $15 to $65.
Singleton took advantage of an enthusiastic market and went on a shopping spree. Over the next five years, he had acquired 130 companies using Teledyne stock trading between 40x to 70x earnings. The shares outstanding quadrupled from 1965 to 1970 (mostly through acquisitions via stock, but also a 3% stock dividend — a dividend paid in shares rather than cash — paid on four of those years).
Then the 1970s bear market hit. Teledyne stock tanked. Its P/E dropped below 10.
An outsider only looking at the stock price would see a horrendous picture. An investment in Teledyne in 1966 would rise 235% by 1968, then tumble to a 40% net loss by 1974. It was a devastating round trip for anyone who hung on. Continue Reading…
Estate Planning Study Guide
Contains the notes on the Estate Planning study book material for the CFP Board Exam. Topics cover the many ways to effectively and efficiently transfer wealth regarding probate and around the gift and estate taxes.
The Notes
Wise Words on Risk Management
The art of long-term investing is about surviving the short run. It’s risk management 101.
This is a friendly reminder that every investment brings the possibility of gain or loss. But when the market’s rising, and everything is great, it’s easy to become complacent and focus less on the downside.
Every investment has a downside, even if you can’t see it. Random things happen. Being wrong is possible. Markets are always changing, and with it, the riskiness of your portfolio.
Prudent risk management starts with the obvious question: what can go wrong? What’s the downside? Now is a good time as any to reacquaint yourself with it.
Because when the market’s rising, and things are going well, it’s the perfect time to test the survivability of your portfolio and make any needed adjustments. Risk management only works if you prepare in advance.
Don’t just take it from me: Continue Reading…
Retirement Planning Study Guide
Contains the notes on the Retirement Planning study book material for the CFP Board Exam. It covers the numerous qualified and non-qualified retirement plan options and additional employee benefits.