Reblog: Jim O’Shaughnessy: 25 Timeless Lessons From 30 Years Of Value Investing


One of our favourite value investors here at The Acquirer’s Multiple is Jim O’Shaughnessy.

O’Shaughnessy recently wrote an awesome series of tweets detailing twenty five investment lessons that he’s learned over thirty years of value investing. They’re a must read for all investors.

With Jim’s permission here are his twenty five timeless investing lessons:

  1. I have been a professional investor for over 30 years. What follows is some things I think I know and some things I know I don’t know. Let’s start with some things I know I don’t know.
  2. I don’t know how the market will perform this year. I don’t know how the market will perform next year. I don’t know if stocks will be higher or lower in five years. Indeed, even though the probabilities favor a positive outcome, I don’t know if stocks will be higher in 10 yrs.
  3. I DO know that, according to Forbes, “since 1945…there have been 77 market drops between 5% and 10%…and 27 corrections between 10% and 20%”. I know that market corrections are a feature, not a bug, required to get good long-term performance.
  4. I do know that during these corrections, there will be a host of “experts” on business TV, blogs, magazines, podcasts and radio warning investors that THIS is the big one. That stocks are heading dramatically lower, and that they should get out now, while they still can. Continue Reading

Reblog: How Investor Behaviour Gets in the Way of Success


Most textbooks portray humans as self-interested people making rational economic decisions, but people often are far from rational in making investment decisions.

Behavioral economics provides insight into why humans make sub-optimal decisions, studying the impact of psychological, cognitive and emotional factors on economic and investment decisions. Two winners of the Nobel Prize in economics, Richard Thaler and Daniel Kahneman, have been recognized for their pioneering work in behavioral economics.

In awarding the Nobel to Thaler in 2017, the Royal Swedish Academy of Sciences stated, “His contributions have built a bridge between the economic and psychological analyses of individual decision-making.” Thaler’s work was instrumental in pension reform, illustrating how subtle changes in framing can lead to dramatically different consumer choices. Thaler’s research contributed to policy changes including automatic enrollment of employees in 401(k) plans and the use of target date funds as the default option for new 401(k) enrollees instead of money market funds.

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Reblog: Seth Klarman, David Abrams, and Howard Marks on Value Investing: Great Read


One of our readers shared the transcript of a roundtable talk among Seth Klarman, David Abrams, and Howard Marks almost 10 years ago. It is a very long read (22 pages) but if you’d like to learn about these great value investors and their investment approaches, it is a great read. I will share some excerpts from each of these investors and share the link at the bottom of this article. Here is how Seth Klarman summarized what Baupost does:

“In terms of investing I would say that there is no exact formula for what we do. We try to use all the value investing principles we know. The world is imperfect. The world doesn’t just dish up net, nets all the time. The world doesn’t dish up stocks trading below cash all the time, doesn’t deliver fine businesses at eight times earnings all the time. So we look very hard for mis-pricings, for information asymmetries. for supply/demand imbalances, and we find ourselves at various times heavily in distress debt or no position in distress debt, significantly involved in equities and uninvolved in equities, very focused on private markets or uninvolved because you can create the same assets cheaper in the public market. So in a nutshell that’s our approach. Very opportunistic. We try to be not siloed the way many people are. We don’t have industry analysts we have generalists who can move quickly from working one day on a drug stock to another day on the distress debt of a bank, and another day even potentially on a mortgage security or real estate investment. That’s not easy but it does provide constant stimulation, a lot of cross-training, which people enjoy, and it also means that our resources will always be deployed in the most interesting areas all the time. So that’s Baupost in a nutshell.”

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Reblog: Successful Investing is Beautifully Boring


If you question how ‘boring’ can be beautiful, you have been following the wrong investment strategy.

Too many people have the misconception that investing is glamorous. The reality is that glamour is the last thing you will find in the stock market, most especially if you plan on being successful.

Hedge fund guru, George Soros sums it up brilliantly: “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”

Sure, we have all heard of a stock market success story or two. You probably have an acquaintance who made a decent return from investing in a tech stock that tripled in price before selling. Maybe even someone who inadvertently timed the 2008-09 crash correctly. In most cases, these successes are short-lived and can be attributed to pure luck. Although these ‘successful investing’ stories make for good dinner-party conversation, they are by far the exception among prosperous independent investors.

The fact is investors who produce the flashiest returns, time and time again, usually do so in the most unglamorous manner. A great example is Warren Buffett, who built an empire investing in so-called ‘boring’ stocks.

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Reblog: 37 Amazing Lessons I Learned About Investing From Jim Cramer


Every day I jot down on yellow legal paper a list of ideas and subjects that I think will be interesting to our subscribers and that I can add value to — topics for future opening missives in my Diary. 

Each morning, at around 4:45, I think about what I will write as the subject of my opener for the day.

I typically contemplate the prior day’s market action and the overnight price changes in the major asset classes and regional markets around the world and I try to come up with something relevant, topical and actionable.

Something on my list, for many moons, is the subject of the lessons I have learned from Jim “El Capitan” Cramer.

Over the years I have written about the contributions that Jim has made and I have defended Jim as well against the wrong-footed criticism that he often faces in his role as a high-profile and visible public figure.

My defence of Jim is not done because I essentially have worked for him over the last two decades. Rather, it is heartfelt and done in the recognition of the contributions that Jim has made since he invented and founded TheStreet. I do this in large part because Jim has been my professor, an important contributor to my investment experience.

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Reblog: What Investors Need to Know About Investing in Low PE Stocks


Man and woman in business attire happily looking at computer screen
Value investing starts with low PE stocks, but it shouldn’t be an investor’s only financial metric.

What do Warren Buffett, Ben Graham, Seth Klarman, and Peter Lynch all have in common? Besides being wildly successful investors, they’re all are adherents to value investing, a method where one attempts to buy securities that have a higher intrinsic value than their current price.

One of the most basic forms of value investing is to find stocks with low price-to-earnings (PE) ratios. The PE ratio is a simple ratio that divides the current price per share of a company by the earnings per share over the trailing-12-month period. The logic behind buying low PE stocks is simple: As an investor, you are ultimately entitled to a pro-rata portion of company earnings, so paying the lowest cost, or multiple, for those earnings is preferable than paying a higher multiple. Essentially, your dollar is buying a larger portion of company earnings than it would with a high-multiple stock.


Reblog: The Four Fundamental Skills of All Investing


In his book Succeeding, John Reed wrote one of the smartest things I’ve ever read:

When you first start to study a field, it seems like you have to memorize a zillion things. You don’t. What you need is to identify the core principles – generally three to twelve of them – that govern the field. The million things you thought you had to memorize are simply various combinations of the core principles.

This extends beyond those learning a new field. I think it’s most relevant for those who consider themselves experts. The root of a lot of professional error is ignoring simple ideas that seem too basic for those with experience to pay attention to.

Having seen the investing world from several different angles, four skills stand out as governing most of outcomes.

1. The ability to distinguish “temporarily out of favor” from “wrong.”

The two strongest forces in investing are “This investment looks broken because that’s how opportunity presents itself” and “This investment looks broken because it’s actually broken.” It’s hard to tell the difference in real time. Distinguishing between the two relies on accurately calculating the odds that something will eventually come along to heal or promote the market or company that looks broken. And since those odds are always less than 100%, it can take a while to tell if you’re any good at it, because even when the odds are in your favor the outcome can go the wrong way. It’s hard to do. But worse, and more common, is forgetting that a distinction needs to be made in the first place.

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Reblog: 3 Mistakes Novice Investors Make All The Time & How To Avoid Them


Investing is a difficult business and that’s why most people under-perform the market. That said, here are three common mistakes novice investors make all the time and how to avoid them.

1) They Chase Price:

People do not fully understand the way the market works. The biggest lesson novice investors should learn is that the market is counter-intuitive in nature. The second biggest lesson is that successful investors separate price from value. A common mistake novice investors make all the time is that they tend to chase price rather than make decisions based on the underlying fundamentals.

2) They Confuse Price With Value

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Reblog: How Heisenberg’s Uncertainty Principle will help you make better investments


As mentioned in my previous blog on the double slit experiment, things can act as both particles and waves at the same time. In fact, it is known that everything in the entire universe acts in this manner. In 1927, German physicist Werner Heisenberg introduced the Uncertainty Principle which states that we can not measure both the position and the speed of a particle with total accuracy. The more accurately we measure one value the more uncertain the other becomes. Heisenberg’s notion can be used to explain a number of phenomena including and not limited to Alpha Decay, which is a type of nuclear radiation and the most common form of cluster decay.

But, how does this relate to investing? Unfortunately, this isn’t going to eliminate all uncertainty from your investments or your business but it will enable you to embrace it and use it in your favour. There will always be uncertainty and risk in everything you do, and it is important not to get caught up attempting to eliminate it all.

The goal of an investor is to reduce risk as much as possible while still making a desirable return. Yet, risk and return are closely related meaning there will always be a degree of risk if you want to make great returns. In fact, there are two kinds of risk, unsystematic risk and systematic risk. Unsystematic risk is also known as “diversifiable risk” and can be reduced through diversifying your portfolio. Systematic risk therefore relates to all other risk such as the kind that comes with the market. This risk can not be controlled and diversifying your portfolio will not reduce this risk at all.

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Reblog: Sun Tzu, The Art of War and your portfolio


Investing is full of sports metaphors, most of which are drawn from blood sports such as boxing, strategic team sports including football, and individual sports where brains are as important as brawn, such as golf. Those sports are all full of common metaphors drawn from warfare. In fact, all sports are, in essence, proxies for warfare, which makes a 2,000-year-old text particularly relevant to sports, but also to investing as well.

Translated into many languages and still referred to as one of the great works on military strategy and tactics, the lessons of Sun Tzu’s The Art of War are particularly relevant to investors as they navigate increasingly complex asset classes and investment strategies.

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