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April 20 - April 25, 2024
“Let’s face it,” he said: “a great deal of investing is on par with the instinct that makes a fish bite on an edible spinner because it is moving.” Investors too bite on what’s moving and can’t sit on a stock that isn’t going anywhere.
What investors should do is focus on the business, not on market prices.
“When experienced investors frown on gambling with price fluctuations in the stock market, it is not because they don’t like money, but because both experience and history have convinced them that enduring fortunes are not built that way.”
take an investment action for a noninvestment reason,” Phelps advised. Don’t sell just because the price moved up or down, or because you need to realize a capital gain to offset a loss. You should sell rarely, and only when it is clear you made an error. One can argue every sale is a confession of error, and the shorter the time you’ve held the stock, the greater the error in buying it—according to Phelps.
In the stock market, the evidence suggests, one who buys right must stand still in order to run fast.” It is superb advice.
Investing is, arguably, more art than science, anyway.
The stock did quite well, I recall I bought it for $2/share. I held onto it for 3 years and got a 4–5 bagger out of it. I was pretty impressed with myself at my acute market acumen. It stalled out eventually and I sold it around 1996 as I got tired of it treading water. Now mind you the original premise never changed, it was always intact, yet I craved new action. If I had held on until the blow
Key here is the idea that you must sit still.
Buffett guy over the past ten years, you must invest with him.” So you check out Warren Buffett and find that his investment vehicle, Berkshire Hathaway, had indeed been an outstanding performer, rising from about $8 in 1962 to $80 at the end of 1972. Impressed, you bought the stock at $80 on December 31, 1972. Three years later, on December 31, 1975, it was $38, a 53% drop over a period in which the S&P 500 was down only 14%. You might have dumped it in disgust at that point and never spoken to that friend again. Yet over the next year it rose from $38 to $94. By December 31, 1982 it was $775
...more
The Investor’s Dilemma,
Sense & Nonsense in Corporate Finance and What’s Wrong with Wall Street.)
The biggest hurdle to making 100 times your money in a stock—or even just tripling it—may be the ability to stomach the ups and downs and hold on.
stocks were still often the best way to preserve purchasing power over a period of years, even in devastated
It melds perfectly with the idea of 100-baggers, because if you truly want 100-baggers, you need to give stocks some time.
To make money in stocks you must have “the vision to see them, the courage to buy them and the patience to hold them.”
Investing is a reductionist art, and he who can boil things down to the essential wins.
Finding what will become a 100-bagger is as much about knowing what not to buy as it is about knowing what to buy. The universe of what won’t work is large. Knocking out huge chunks of that universe will help make your search for 100-baggers easier.
With that warning, I’ll add that the median sales figure for the 365 names at the start was about $170 million and the median market cap was about $500 million.
Aflac’s price-to-sales ratio, by the way, went from about 1.7 to 5.4.
rapid increase in sales, rising profits and a rising ROE.
“You could get a really good long run out of some of those quick-service restaurant ideas,” he said.
Jason is reluctant to buy a high-ROE company where the top line isn’t at least 10 percent. But when he finds a good one, he bets big.
“The smart entrepreneurs don’t actually go for home runs,” Jason said. “They hit a ton of singles.” He mentioned Constellation Software and MTY Food Group, two of his bigger positions. Management still owns a lot of stock. And it hits lots of singles. The end result is a really nice pattern of growth without risk, he said. To sum up: It’s important to have a company that can reinvest its profits at a high rate (20 percent or better).
Todd Peters of Lyndhurst Alliance,
There is only one combination of facts that makes it advisable for a company to repurchase its shares: First, the company has available funds—cash plus sensible borrowing capacity—beyond the near-term needs of the business and, second, finds its stock selling in the market below its intrinsic value, conservatively calculated.
Atlas Financial
It seems to me a book on 100-baggers must be like this because much of the hunt is qualitative, not driven by any formula. Moreover, realizing a 100-bagger return means you must adopt a certain mindset. Looking for 100-baggers means you’re not going to care much about what the Federal Reserve is doing. It means you’re not going to buy a stock because you like the chart (next month’s chart might give us a whole different signal). Paying attention to these things is a distraction. Investing for 100-baggers means you have to plant your feet firmly in the ground and stand still.
15% of the money managers
2014 “is likely to enter the record books” as the year when active managers—as opposed to index funds—“delivered
Most people chase returns. As an example, consider one of my favorite studies of all time, by Dalbar. It showed that the average mutual fund earned a return of 13.8 percent per year over the length of the study. Yet the average investor in those funds earned just 7 percent. Why? Because they took their money out after funds did poorly and put it back in after they had done well. Investors were constantly chasing returns.
When asked about this underperformance, he replied, “I think it is an irrelevant data point. There is nothing intelligent that one can say about short periods like 10 months. I never make investments with any thought to what will happen in a few months or even a year.” (emphasis added) The problem with the 24/7 media culture we live in is that everybody has to have something to say almost all the time. And yet most of the time there really isn’t anything worth saying.
The best investors lag the market 30–40 percent of the time.
In the financial markets, people often wind up sabotaging their own portfolios out of sheer boredom. Why else put money into tiny 70-cent-share mining companies that have virtually no chance of being anything at all? Why bother chasing hyped-up biotech companies that trade at absurd levels based on flimsy prospects? Because people are bored!
“all men’s miseries derive from not being able to sit
read every day somebody, somewhere writing about QE or interest rates or the dollar. They are mostly rehashing the same old narrative: “When QE stops, stocks will fall.” “The dollar is going to collapse!” “When interest rates go up, stocks will fall.” I mean, for crying out loud, how much more can you read about this stuff? And for how many years on end?
China Taking China as a category unto itself, Block had a good line: “China is to stock fraud what Silicon Valley is to technology.” He believes investors
Be careful around companies that seem to be created mainly to scratch an investor’s itch.
“They tend to take the market and themselves too seriously. They spend a large part of their time trying, valiantly and ineffectively, to do things they can’t do well.” What sorts of things? Among them is “to forecast short- or long-term changes in the economy, and in the price level of common stocks.”
Instead of playing the guessing game, focus on the opportunities in front of you. And there are always, in all markets, many opportunities.
With 10,000 securities
I know some Americans are interested in investing abroad because they are so down on US politics or the US economy or whatever.
In essence, hunting for 100-baggers is completely independent of whatever is happening in the market.
I feel no shame at being found still owning a share when the bottom of the market comes. I do not think it is the business, far less the duty, of an institutional or any other serious investor to be constantly considering whether he should cut and run on a falling market, or to feel himself open to blame if shares depreciate in his hands. I would go much further than that. I should say it is from time to time the duty of a serious investor to accept the depreciation of his holdings with equanimity and without reproaching himself.
Keynes now focused less on forecasting the market. Instead, he cast his keen mind on individual securities, trying to figure out their “ultimate values,” as he called them.
He also became more patient. Giving an example, Keynes described how it was easier and safer in the long run to buy a 75-cent dollar and wait, rather than buy a 75-cent dollar and sell it because it became a 50-cent dollar—and hope to buy it back as a 40-cent dollar.
He also learned to hold onto his stocks “through thick and thin,” he said, to let the magic of compounding do its thing (in a tax-free fashion too, by avoiding capital gains taxes). “‘Be quiet’” is our best motto,” he wrote, by which he meant to ignore the short-term noise and let the longer-term forces assert themselves.
The PEG ratio is simply the (P/E Ratio)/(Annual EPS Growth Rate).
Start with acorns, wind up with oak trees.
The indices can tell you what kind of environment you are in. It’s certainly harder to find great opportunities
in highly priced markets. And it’s easier to find big winners at market bottoms (but perhaps not so easy to make yourself buy them, as fear is rife at such times). These facts should surprise no one.
