Watheeqa Investor Digest – June 2009
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Watheeqa Investor Digest June 2009
What it takes to be great
“Painful and demanding practice and hard work” writes Geoffrey Colvin.
He begins the article by questioning “What makes Tiger Woods great? What made Berkshire Hathaway Chairman Warren Buffett the world's premier investor? Well, folks, it's not so simple. For one thing, you do not possess a natural gift for a certain job, because targeted natural gifts don't exist. (Sorry, Warren.) You are not a born CEO or investor or chess grandmaster. You will achieve greatness only through an enormous amount of hard work over many years. And not just any hard work, but work of a particular type that's demanding and painful.
Buffett, for instance, is famed for his discipline and the hours he spends studying financial statements of potential investment targets. The good news is that your lack of a natural gift is irrelevant - talent has little or nothing to do with greatness. You can make yourself into any number of things, and you can even make yourself great.” Read more
Source: Fortune Magazine, October 19, 2006. WID
Great first impressions: Ten signs of a strong company
The authors argue “An entrepreneurial investor seeks companies that offer lot of value for a low price, but prices fluctuate. Thus, price helps determine when to buy, but a host of other factors influence what to buy. We look for ten specific strengths when evaluating a company.”
These are
- (1) A simple business model
- (2) Wide-moat
- (3) Recurring revenue
- (4) Low inventory risk
- (5) Alignment of interests
- (6) Healthy culture
- (7) Flat organizational structure
- (8) Low reinvention risk
- (9) Low capital requirements and
- (10) Favorable demographics.
Source: West Coast Asset Management, WID
Baupost Group – Seth Klarman’s OID interview
“In addition to being a thoughtful writer and speaker on the subject of value investing, Klarman has an outstanding track record as an investor. Since its February 1, 1983 inception through December 31, his Baupost Partnership has provided its limited partners an average annual return of 16.5% net of fees and incentives, versus 10.1% for the S&P 500. This is an excerpt from Klarman’s comments and Q&A which followed at the Heilbrunn Center for Graham & Dodd Investing’s 18th Annual Graham & Dodd Breakfast and at a symposium entitled “Celebrating 75 Years of Security Analysis” both of which were held on October 2nd in Manhattan.” – OID.
Source: Outstanding Investor Digest - OID, March 17, 2009 WID
TIFF Commentary – Seth Klarman’s interview
In this insightful interview Seth Klarman discusses a wide array of topics ranging from his role models to what investing is all about – an art, science or craft. Seth explains “Investing, I would say art first and foremost, craft second, science third. To me, the science of valuing things and identifying when things sell at a discount is as straightforward as could be. It’s a commodity these days; when you hire business school kids, they all know how to do that. There are nuances and places they might make mistakes, but I think that’s the easiest part, albeit for a layperson it might seem like the hardest part. I think there is a big element of craft in showing up, especially for a value investor where part of the game is discipline.” Seth adds “It’s like Warren Buffett says, you are in a game with no umpire and no called strikes so you can keep the bat on the shoulder for a long time. So the craft of showing up and saying “Nope, nothing interesting today. Nope still nothing interesting,” is really important.”
Source: TIFF – The Investment Fund for Foundations, 22 July 2008 WID
JPMorgan Chase – 2008 Annual letter to shareholders
Stop whatever you are doing right now and read Jamie Dimon, Chairman and CEO’s letter to shareholders. It’s a 28 page fascinating piece. Next to Buffett, we would rate Jamie’s address as one of the best shareholder letters we have ever read, from any CEO, ever. In Berkshire Hathaway’s annual meeting this year, Buffett said “I recommend Jamie Dimon's shareholder letter; Jamie did a great job. It's as good a shareholder letter as I've seen. It's a long letter, but worth reading. He did a great job writing about the crisis.”
Source: JPMorgan Chase WID