I recently read about 40 pages of quotes from value investors around the world. The quotes were compiled by Value Investor Insight and they’ve made the entire collection free for anyone to read — you can view them all here.
But for those who don’t want to read all 40 pages, I’ve highlighted 15 of my favorite quotes below. By journaling and sharing them here, I hope they help my investment process going forward and also yours.
1. It is one of the hardest things to do and that is to remain a disciplined, long-term investor at all times.
“If the entire country became securities analysts, memorized Benjamin Graham’s Intelligent Investor and regularly attend- ed Warren Buffett’s annual shareholder meetings, most people would, nevertheless, find themselves irresistibly drawn to hot initial public offerings, momentum strategies and investment fads. People would still find it tempting to day-trade and perform technical analysis of stock charts. A country of security analysts would still overreact. In short, even the best-trained investors would make the same mistakes that investors have been making forever, and for the same immutable reason — that they cannot help it.” Seth Klarman
2. Value investors need to harness time and use it tactically.
“Time arbitrage just means exploiting the fact that most investors — institutional, individual, mutual funds or hedge funds — tend to have very short-term time horizons, have rapid turnover or are trying to exploit very short-term anomalies in the market. So the market looks extremely efficient in the short run. In an environment with massive short-term data over- load and with people concerned about minute-to-minute performance, the inefficiencies are likely to be looking out beyond, say, 12 months.” Bill Miller
3. Great investment ideas are not necessarily complicated.
“There’s a clarity that comes with great ideas: You can explain why something’s a great business, how and why it’s cheap, why it’s cheap for temporary reasons and how, on a normal basis, it should be trad- ing at a much higher level. You’re never sitting there on the 40th page of your spreadsheet, as Buffett would say, agonizing over whether you should buy or not.” Joel Greenblatt
4. There’s a perception that numbers, quants, and algorithms rule the stock market, but it’s so much more than that.
“I think my background has helped me learn to think well conceptually. Investing is not just about numbers. It’s also about imagination and structure and narrative and characters — the types of things we liberal-arts majors should know something about.” John Burbank
5. You should be able to defend your highest conviction investments at all times.
“There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions. You can’t be a good value investor without being an independent thinker — you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do. The back and forth that goes on in the investment process helps you get at that.” Joel Greenblatt
6. Your edge is not going to come from data or news, it’s going to come from something of your creativity.
“Everyone tends to see the same things, read the same newspapers and get the same data feeds. The only way to arrive at a different answer from everybody else is to organize the data in different ways, or bring to the analytic process things that are not typically present.” Bill Miller
7. A good investment is not entirely dependent on the balance sheet, it’s also about the management team.
“We tend to be more about the jockey than the horse. It’s important to under- stand how people are going to behave under stress. You don’t have to predict the future if you know the company has the assets and management to do well in difficult times. I believe that’s when the seeds for exceptional performance are planted.” Bruce Berkowitz
8. Every investment should have a price, and if it’s not there now, you will be rewarded greatly if it ends up there down the road.
“Our best ideas tend to come from what I call “old research, new events.” That’s typically the good company you’ve studied carefully and would love to own at the right price, that gets marked down after it trips or its industry goes out of favor.” Ricky Sandler
9. Always remember that a cheap investment is cheap for a reason and cheap does not automatically make it a value.
“One of the big mistakes value investors can make is to be too enamored with absolute cheapness. If you focus on statistical cheapness, you’re often driven to businesses serving shrinking markets or that have developed structural disadvantages that make it more likely they’re going to lose market share.” Bill Nygren
10. You must know your circle of competence and when you should or should not be investing.
“I’d always said that if a guy was long the best 50 companies he knew and short the 50 worst, if that didn’t work you were in the wrong business. But that strategy was literally a recipe for bankruptcy from 1998 to 2000. I said when I closed down that it was a market I didn’t understand, and I didn’t.” Julian Robertson
11. Change your outlook on life, it will spark the little things, which in turn will lead to the big things.
“People who are in a good mood are more inclined to try learning new skills, to see things in a broader context, to think of creative solutions to problems, to work well with other people, and to persist instead of giving up. If you were writing a recipe for how to make more money, those are among the first ingredients you would include.” Jason Zweig
12. Human psychology plays a massive role in the world of investing.
“To suppose that the value of a common stock is determined purely by a corporation’s earnings discounted by the relevant interest rates and adjusted for the marginal tax rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin and believed Orson Wells when he told them over the radio that the Martians had landed.” Jim Grant
13. Durability is a trait you should never overlook.
“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.” Warren E. Buffett
14. Avoid complacency and stay vigilant.
“One of the economists who has heavily influenced the way I think is Hyman Minsky, who always said, “Stability begets instability.” The very idea is that the more stable things appear, the more dangerous the ultimate outcome will be because people start to assume everything will be all right and end up doing stupid things.” James Montier
15. I am making this investment today because… You need to be able to answer that every single time.
“I never buy anything unless I can fill out on a piece of paper my reasons. I may be wrong, but I would know the answer to that. “I’m paying $32 billion today for the Coca Cola Company because.” If you can’t answer that question, you shouldn’t buy it. If you can answer that question, and you do it a few times, you’ll make a lot of money.” Warren Buffett
The worst mistake I ever made in the stock market all started with the TV
It pays to turn it off.
I’ve been there before and it’s brutal. Omg I just heard a wild idea on TV. Buy, buy, buy. You need to get in this before everyone else does. Get to your computer right now man!
I once did that with Japanese banks. I thought I was going to be a master trader of Japan. The young guru. Being young and overconfident is an amazing thing. To this day I still literally know nothing about Japanese banks. But someone on one of those shows pitched the idea. It sounded crazy, but crazy enough to where maybe it was a slice of brilliance!
It did not go well.
It’s probably the worst single investment I’ve ever made. And this is coming from a guy who once tried to pick a reversal in the National Bank of Greece:
Some of you have also probably been in a similar position. Especially in your very early days of investing. You hear an idea and it sounds like a pure money maker. Then you head to a computer, thinking you need to do this before everyone else does, like you can’t waste another second or you might miss it. A few days or weeks later, that idea you thought was pure gold has fallen apart like the Cleveland Browns.
Just press the like button already if that’s been you. No shame. It’s why a piece like this has to be published. It’s kind of surprising how few people comment or write about this for the sake of the average retail investor.
The thing with financial TV is they need to fill airspace at all times. No time can be boring and no time can be wasted. Time is money on TV. The content and ideas are not so much about quality research or trying to be good stewards for everyday investors, but instead about trying to pitch “can’t miss” stories and then selling ads based on the viewership those stories receive.
People always talk about fiduciary duty in financial markets. Meaning money managers, banks, and professional investors must act in good faith toward their clients. But the financial media is basically never held to those same standards. And that brings me to the following tweet that some investors might call a work of art. Like it’s The Last Supper for traders:
Are those the headlines you want to follow?
The thing about financial decisions, and especially trying to call tops or bottoms, is that it’s really hard to do. There’s a mind-boggling amount of randomness involved. And there are a lot of smart people out there taking the other side of your idea every single day.
While financial TV is trying to fill airtime, the reality is that good ideas and investments take time. I think the excerpt you’re about to read below does a great job explaining just how stressful, hard, and difficult it can be. The perfect investment decision is not a 30-second sound bite on financial TV:
I’m still a mediocre investor. But I’m also crazy dedicated to the game. I keep reading, researching, and following markets. The growth has been slow, but I’m in it for the long-haul. A few big lessons have emerged over the years. One of them is this post, which seems simple in theory, but still many new investors fall victim to at some point.
If you’re new to markets and reading this, hopefully I just saved you a few dollars. If you’re a wise investor with hair flowing like Gandalf, hopefully we just shared a few laughs — don’t take financial advice from the TV.
If you can’t stand this post and want to argue, let’s hear it! Press the comment button below and let’s go.
If you want to see more like this, please drop me a note on Twitter (@scheplick), StockTwits (@scheplick), or right here on Medium Stefan Cheplick.
If you live with consumer debt, you are not alone. According to U.S. Federal Reserve data U.S. households have on average $15,863 in credit card debt and $33,090 in student loans. The upside to the personal debt crisis is that there are tried and true methods for getting rid of it. Here is a step-by-step guide to getting out of debt, once and for all:
1) Get real and collect statements for each and every one of your debts.
2) Get your free Credit.com credit report to double-check the accuracy of your debts, including notes of missed payments and credit limits.
3) Create a list of all your debt, including interest rates, monthly minimum payments and any deadlines.
4) Create a monthly budget, and figure out how much you can afford to pay towards your debt.
5) Research lower rates. Depending on your credit score, you may qualify for credit cards with lower rates.
6) Call the holder of any outstanding medical bills and negotiate.
7) If you’re totally overwhelmed with this process, or truly believe that you cannot dig out of debt on your current income, get professional advice.
Binary options trading is a new way people are earning money online. They are a financial instrument whereby you purchase a contract on an asset (e.g. AUD/USD, USD/JPY, Gold, Nikkei etc.) and receive the payout upon the expiry time if you predicted correctly. To trade binary options, we only need to understand two potential outcomes: will the asset go up or will it go down in value? Gold is one…
Today the government told us that the month of July created 255,000 jobs, far beyond the estimate of 180,000. In fact the headline revised June’s numbers up by 5,000 jobs. They also told us the unemployment rate stayed the same at 4.9%. But as people say, “the devil is in the details”.
So let’s get to those details:
1) Un-adjusted growth was just 85,000 jobs. What does this mean? Simply if the government didn’t apply a seasonal adjustment to the numbers the jobs report would have been dismal, falling far short of the estimated 180,000 jobs.
2) May’s dismal numbers were revised lower by 10,000 jobs.
3) Labor Force Participation Rate remained at 1977 levels, and we all know how great the economy was in the 70′s.
4) Waiters, waitresses and bartenders continue to be one of the largest job creators. Now I don’t want to berate waiters, waitresses and bartenders but the fact remains those people working in that industry only make so much money, as a whole they certainly aren’t middle income jobs. Unfortunately for all of us the government is trying to build a strong economy on their backs.
5) Jobs in construction and manufacturing remained weak, one of the weakest in the report. America was built on these jobs and from the 1950′s forward were the backbone of the middle class. Unfortunately for all of us the government is doing nothing to create these types of jobs.
6) Despite the governments claims that the housing market remains strong, construction payrolls are the weakest since 2012.
7) Obamacare to the rescue, one of the biggest job creators which saw healthcare jobs increase by 49,000.
So don’t just listen to the talking heads, don’t be a headline reader, the facts within the report prove the numbers weren’t so good after all.
I’m sitting in the jam packed kitchen that the Mindful Chef head chef develops the recipes for their weekly food boxes, now sent to 8000 households each week. Rob Grieg-Gran, one of the co-founders and CEO, is with me to offer some advice on founding a company with friends, crowdfunding and marketing attribution. If you are new to food boxes, they take the shopping and decision making out of…