Ben Graham always made the point that even if you thought you had a portfolio of very cheap stocks, if the market at the time was fully priced, you should have at least 25 percent of your portfolio in something other than equities, such as cash or bonds. To do otherwise would be to delude [...]
Periods of low returns have often historically been accompanied by higher volatility. That scares investors away, but volatility in a low-return world is a blessing for us, because there's more opportunity to buy low and sell high. That's one main reason we have 15 percent of our portfolio in cash, so we can pounce when [...]
Buy and hold shouldn't really be part of a value investor's vocabulary. All we know is price and value if price meets value, whether in three months or three years, there's no justification for just sitting there.
People tend to assume that the only form of active portfolio management is through relatively concentrated portfolios. We think there's an equally legitimate form of active money management in running a diversified portfolio that has nothing to do with the benchmark.
We focus first on good businesses, with high returns on capital, barriers to entry and significant free cash flow generation over a cycle. If you're right about the business, time should be your friend, so catalysts are not important.
Spending time with management isn't important in the early stages of the research process. We'd rather analyze the company, its opportunities and issues, and how it has allocated capital in the past, without first being fed the party line. When we do meet with management, it should be an educated discussion between two knowledgeable parties.
We haven’t been traditional emerging-markets investors because we do not chase growth or glamour, but we like nothing better than to invest in emerging markets on a contrarian basis. Strong economic growth is never steady, so you can find nice opportunities to invest after booms have gone temporarily bust.