David Herro

It has always made sense to me to rely far more on cash flow than reported earnings. When I was in graduate school, my brother-in-law hired me to do some temporary work at a canning company. One project was to go through a pile of invoices and pull out anything that looked at all like [...]

David Herro

I would assert the biggest reason quality companies sell at discounts to intrinsic value is time horizon. Without short-term visibility, most investors don’t have the conviction or courage to hold a stock that’s facing some sort of challenge, either internally or externally generated. It seems kind of ridiculous, but what most people in the market [...]

David Herro

The human brain is incapable of conceptualizing something vastly different from what’s happening today. But the big-money ideas are those where the changes are far beyond what you can conceive today. The closer you can get don’t have the conviction or courage to hold a stock that’s facing some sort of challenge, either internally or [...]

David Herro

For our type of investing, which involves buying big stakes in companies and investing for the long term, we need transparency and a firmly established rule of law. If we can’t believe the financial statements or we see too much risk of the rules being changed after the game starts, the whole exercise is pointless. [...]

David Herro

There are still language barriers, particularly in Japan, but that’s gotten better over the years as English has become firmly entrenched as the international language of business. Culturally, in some parts of the world we’re up against a kind of social-democracy attitude, that says shareholders are equal constituents with employees and customers and suppliers and [...]

David Herro

As long as it’s a good-quality business selling at an attractive price, I don’t care much about what the company makes or sells. One thing we are very conscious of is the degree of leverage in a business. That can be financial leverage, which is reflected on the balance sheet. It can be operational leverage, [...]

David Herro

Someone asked me the other day whether watching what was going on [in troubled markets] felt lousy, and of course it does. But you can only buy quality cheap when people are afraid. We earn our keep much more in difficult markets than when everybody's serene and happy.

David Herro

As a value investor, I was initially almost exclusively focused on companies with good balance sheets selling at low valuation multiples. There's nothing inherently wrong with that, but I've learned from experience that when cheapness blinds you to not-so-hot businesses or poor management, it's a recipe for disaster. We still only buy bargains, but we [...]