I had just made an investment mistake. And not just one mistake – I somehow managed to combine three different mistakes on a single investment recommendation. I was a senior investment analyst on a team managing billions, and it was time to decide what to do next.
Read MoreYears ago, I was reading an investor letter of a fund manager, and came across a formula that made everything clear: Change in Price = Price going to Value + Change in Value + Noise
Recently I had a chance to reflect on this formula and deepen my understanding. The result was a new perspective which is helpful in categorizing investments and getting more insight into the portfolio.
Read MoreWhy do we feel pain in investing? Is it good or bad? And how can we cope?
Read MoreThe research note sent electric shocks through Fidelity’s investment department. It was sent by a senior analyst with over 5 years of investing experience who was expected to become a portfolio manager within a few years. It stated: “Any portfolio manager who doesn’t buy this stock, doesn’t deserve to be a PM.”
Read MoreYes, you are living through a bubble in the financial markets. No, this is not an article about how to time the market. No, you don’t know when the bubble will burst (and neither do I). Yes, there are still things that you can do that will set you up for investing success.
Read MoreI was watching our stock prices drift down, day by day. The market value of our portfolio slowly decline. No fundamental news. Just a steady drip-drip-drip of lower stock market prices.
Read MoreAt the heart of investing is understanding why something is mis-priced. Contrary to the belief casually held by many, “it’s cheap” or “it’s a good company” or “it’s growing rapidly” is not a sufficient reason to believe that a mis-pricing exists.
Read MoreRisk management will not produce the best returns.
What?? Then why do it? Because we don’t know the future.
Read MoreFear is rampant. Investors are reverting to their worst behavioral biases and habits in such an environment. You need to do better than the crowds and continue to invest rationally. Here is how.
Read MoreThe company was a spin-off from a healthcare company, one that I have followed for almost 15 years. After months of research and following a collapse in the stock price, an opportunity finally presented itself.
Read More1. Do I understand the business?
2. Can I (approximately) estimate the key financial characteristics 10 years out?
3 …
Read MoreThis is as precarious an investment environment as any that I have experienced during my two decades of investing. Prices of many securities and asset classes are optimistic, in some cases bordering on irrational. When the pendulum of the market swings so far towards greed, we need to be even more careful than we usually are in our capital allocation. Just because most market participants are in a generous mood does not decrease the amount of uncertainty facing businesses. What it does is make it very easy to lose large amounts of money and hard to make good returns.
Read MoreI couldn’t fall asleep. As I was tossing in bed, I felt that I almost had it figured out. Figured out what was wrong with the company that I had recommended that the investment firm that I had worked for invest tens of millions of dollars in. That was before my mind started to put the pieces together and warn me that something wasn’t quite right. And then I had it: the management team was manipulating earnings to make them seem much larger than they really were, and I had just figured out exactly how they were doing it.
Read MoreI was a young equity analyst at one of the largest mutual fund firms in the country. It was the week before Christmas in 2002, and my most important stock recommendation to the firm’s portfolio managers had just declined by 50%. In one day.
Read MoreI am frequently asked: what are the best books on investing? How do I develop my investment philosophy and process? How do I become a good investor? I have mentored many aspiring investors, and I also teach the Value Investing Seminar at the F.W. Olin Graduate School of Business. The investing books that I describe below have helped many aspiring investors make their journey from a beginner to an investing expert.
Read MoreEarlier this year I gave a talk to students at Babson College on how to learn value investing and become an investor. You can watch the talk and the Q&A discussion that followed in this video.
Read MoreLong-term investing doesn’t happen by accident. You need to be prepared. There are three things that can allow you to use market volatility to your advantage: the right structure, a long-term investment process and a behavioral checklist to allow you to remain rational when everyone else is being anything but.
Read MoreWhen I was at a group dinner with Warren Buffett 16 years ago, I asked him: what do you look for when you evaluate a stock? He answered: First he decides whether he can roughly estimate the business’s key economic characteristics 5–10 years out. If he can’t then he eliminates it from consideration right then and there.
Read More“It’s different this time.” This phrase has likely cost many investors far more than they realize. Each period of time is indeed different. However, there are many insights that we can learn from history that should inform how we invest today. Failing to learn from the past mistakes of others can be hazardous to your wealth.
Read MoreWarren Buffett wrote in his 1996 letter to Berkshire Hathaway shareholders: “You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”
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