The nice thing about investing is that if you can protect your physical and mental health you should only get better at it over time. Experience improves your ability to recognize patterns and to exercise judgment in difficult situations, of which there have certainly been no shortage in recent years.
As sensible as a buy-and-hold strategy is in a bull market, it can be dangerous in a volatile, downward-trending one. It's a fair criticism that we historically may have held too closely to our aspirational valuation, even after what we considered our proprietary insight had become conventionally held. We're less worried now about the perfect [...]
If I learned anything as a management consultant, it was the importance of identifying where a business has its greatest competitive advantage and then focusing the growth and development of the business on that nexus of advantage. Companies consistently lose sight of that for a variety of reasons, often resulting in what we call “deworsification.” [...]
I will say that I have in the past fallen into what I call time traps, where I've spent too much time trying to resolve problem investments. We will pick our battles, but usually we're better off helping our best investments maximize opportunities than trying to perform brain surgery on dogs.
We're deliberately concentrated on 10 to 14 investments, for two reasons related to time. First, it takes considerable time to learn enough about a company, its people, and its industry to develop and maintain a proprietary level of insight information, or knowing more than the Street. The second relates to our focus on activism: pushing [...]
In valuing companies, we're putting more emphasis on the relationship between the current price and the worst-case scenario and regardless of the potential upside are more likely to sit and wait if that downside is material. In a sideways market, cash is not trash.
The first thing I do [in researching a company] is look at the proxy for the annual meeting. I want to see what management has done before, how reasonable compensation arrangements are, who's on the board of directors and what their backgrounds are. Red flags include things like somebody's son-in-law being on the payroll, other [...]
We have not done well in fashion-related businesses, which I’d extend to retail, where our record is almost unblemished by success. We tend to be susceptible to value traps in these businesses. One example was our investment years ago in Bombay Company, a home-furnishings specialty retailer. We were attracted by an enthusiasm for the CEO, [...]
We believe it’s prudent for long-term investors to have a significant and growing portion of their portfolios allocated to equities in foreign countries that are growing faster than the U.S. and whose currencies will likely appreciate against ours.
I accept the proposition that public markets are most of the time efficient in pricing large-cap companies, but I've never believed there was sufficient trading volume or research coverage of very small companies to make their prices similarly efficient. So it ought to at least be theoretically possible for an investor in microcaps to have [...]