It’s been a busy week, so just the links. This is what I’ve found worth reading this weekend. Continue Reading…
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Peter Lynch’s Rules Worth Following
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Many investors, especially when they’re starting out, look for the best stocks, the fastest growers, the highest quality, or the quickest buck. It almost makes sense, at first but doing it that way and making money is harder than it appears.
A simpler, yet important approach, is to focus first on things to avoid.
Avoid the worst. Avoid expensive. Avoid things you don’t understand.
In a dive into Peter Lynch’s writing, I came across an article he wrote where he lays out 14 investing rules. Lynch is most commonly known for his “know what you own” stance. His rules also include some things worth avoiding. Continue Reading…
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Curbing the Speculative Urge
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Speculating in markets, and losing, is as old as the hills. So are the solutions to curb it.
It should come as no surprise that market bubbles are inflated on mass speculation. After the bubble bursts, and the dust settles, the calls to prevent it from happening again grow louder.
The most transformative of these episodes followed the 1929 crash. Congress held hearings and blame was passed.
Edwin Lefevre wrote a scathing piece against speculation just two months shy of the 1932 bottom. In it, he pointed out the culprits behind the biggest bubble in history: Continue Reading…
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The Lost Intro to Reminiscences of a Stock Operator
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Reminiscences of a Stock Operator originally began as a twelve article series for the Saturday Evening Post. Edwin Lefevre wrote the series over 12 months starting in 1922.
But when the first edition of the book was published, the first article was left out. The book begins with the eighth paragraph of the second article — “I went to work when I was a kid out of grammar school…” At least, the version I read began that way (can’t speak for other editions).
Lefevre sets the stage for the book in the first article. He begins with a great line:
The market was so weak that you could see customers counting their dead hopes.
The narrator goes to visit an old friend at a brokerage firm. While there, stocks start crashing. The narrator overhears his friend blame it all on Larry Livingston. He must be raiding the market.
But the narrator didn’t believe him, so he sets out to ask Livingston himself. An introduction is made. A meeting is set.
The first of many conversations begin with a rant by Livingston. He offers a lesson on the perils of trying to get rich quick and expecting a better return than the market will offer. Here’s how the conversation went: Continue Reading…
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Quarterly Reading – Fall ’20
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Here’s what I’ve been reading the past three months: Continue Reading…
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Why the Worst Companies Lost Big and How to Avoid Them
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There are a lot of ways to fail at investing. Owning the worst-performing companies is a big one. The solution is a matter of avoidance. Is there a way to find the worst performers in advance?
Henrik Bessimbinder, while researching the greatest companies, looked at the worst-performing companies by decades. He broke the worst performers into two categories: by returns and total shareholder wealth lost.
The difference between the two categories is a matter of total dollars versus the percentage lost. A huge company can lose billions of dollars in shareholder wealth with a tiny percentage loss while a tiny company can have a huge percentage loss only losing millions.
The top 200 companies in each category had a few characteristics that stood out during their worst-performing decade: Continue Reading…