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…

Here’s what I’ve been reading the past three months: Continue Reading…

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…

Investing in wonderful companies popularized by Warren Buffett is becoming more and more common. Successfully doing it is less common because they’re still hard to find without hindsight.

Henrik Bessembinder followed up his research on the greatest companies to see what characteristics made them great. He looked at the best 200 companies in two buckets — by greatest wealth creation and highest excess return by decade.

The difference between the two is like comparing a small $1 million market cap company that grows to $100 million versus a larger $10 billion company that grows to $100 billion. The small company produces a significantly higher return while the other creates more total wealth for shareholders.

The top 200 companies in each bucket had a few characteristics that stood out during their best decade of performance: Continue Reading…