Tag Archives: career

A Reader Asks, “How Can I Improve as a Value Investor?”


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A Reader’s Question

Thank you once again sharing the links, access to the value vault, and your blog posts. My experience over the last couple of years has been primarily in private growth investing, and the insights you have shared have helped me significantly reconsider my investment approach.

I have been reading your book recommendations and following CBS lecture notes, but is there anything else you would advise me to do to become a better value investor? I am keen to learn and it appears that there is culture of apprenticeship in the world of public equity value investing. Maybe I could reach out to some practitioners in London (where I am based) – would you be able to highlight any you would consider particularly strong?
Thanks in advance for your help.

My Reply: There are plenty of case studies and examples on this site to learn about valuation. You can visit:http://pages.stern.nyu.edu/~adamodar/        https://www.coursera.org/course/accountingand…Value Investing for Grown ups by Damodaran to learn about valuation and accounting. But the secret to investing and improvement lies within you. That sounds either profound or hokey, but true. I don’t believe MBA courses or apprenticeship (if you can find one) will really help.  You don’t want to learn about another person’s style, you want to develop your own.  Google and youtube.com Michael Burry for why this is true.

As an example, you can read 5 Keys to Value Investing.  The author worked as an analyst for Micheal F. Price. He would submit ideas and get grilled by Price. I didn’t see a whole lot of mentoring going on.  Of course, you want to study other investors and the psychology of investment:

  1. Charlie_Munger_The_Art_of_Stock_Picking
  2. Buffett Klarman and Graham on Mr Market
  3. Great Investor Behavior
  4. Investing and Personality Type

But there are no shortcuts to studying yourself. You have to consistently and persistently keep a notebook, log, diary or tape recorder of your trades/investments/decisions. Review them that day and a week, month and year later. Study your proclivities. Can you step outside and see yourself objectively?   Impossible?   Hire a high school kid on Summer Vacation to film your day at work and see if you notice tendencies.  You won’t believe the tape!

Do you have a business plan for your investing career? Goals? Map out the steps.

I highly suggest you see how your countrymen developed their own styles in: http://www.amazon.com/Free-Capital-private-investors-millions/ by Guy Thomas

Review: Conclusion “Free Capital” treads original ground in profiling anonymous, “everyman” successful investors that no one has heard of yet who have interesting stories, experiences and lessons to share all their own. We can all learn from more than just Warren Buffett, after all.

It’s not without its flaws, of course. As the author himself states, the book doesn’t cover losing investors, people who took some of the risks investors profiled took, and failed, or who took other risks that didn’t turn out right, and then explores what lessons can be learned from their shortcomings. As an avid deep value (Benjamin Graham) guy myself, I would’ve done without the day trader and some of the other guys who seem like GARPy, momentum-based swing traders with short time horizons and questionable “value” metrics.


As an example, I know that I am an emotional basket-case. I cry during the cartoons if Tweedy Bird gets hurt (http://youtu.be/89FDAYsTgfs).  If I buy a stock at $7.05 and the next print is 7.04, I am on the floor wailing.  If Jim Cramer on CNBC said buy Tweedle Dumb stock, I would wait for the stock to rally, then buy after the news is priced in only to sell at a loss seconds later.

Also, I have an aversion to paying full price. I went “Dutch” on my honeymoon; my wedding had a cash bar. My guests had to take the subway to the reception; some had to hitch-hike. I am a cheapie.

Ok, I have to deal with serious psychological issues, but how does that help YOU?

Well, even I can develop methods to work around my quirks. See the chart at the top of the page. I have been buying certain gold/silver stocks over the past year because of two reasons: historic/generational low cheapness and lack of the same in other markets, in general. But prices can swing 10% in a day!  How would I survive?

My time frame is the next three-to-five years. I study the companies without input from others, I turn off CNBC, and I place my buy and sell orders BEFORE the market and then check at the end of the day. I may go months without doing anything in terms of buying or selling, but I will keep following the companies and their industries closely.  I have also held stocks like Enstar (ESGR) for a decade.

My time-frame is longer than most participants.  I work around my psychological hurdles because I have faced them. And only YOU can face yours.

I hope that helps.

Breaking into Money Management


Info from Whitney Tilson on how to break into Money Management–common sense advice.



If You Want A Job With Whitney Tilson, Don’t Send Him A Resume — Try Something Much More Aggressive

Julia La Roche| Oct. 9, 2012, 3:11 PM| 3,802| 9


Like most big name hedge fund managers, Whitney Tilson, the founder of T2 Partners, gets a lot of emails and resumes from people seeking a job at his fund.

The thing is Tilson doesn’t want a resume.

If you want a job at T2 Partners, you’ve got to be much more aggressive than that.

“I would tell anyone, when somebody emails me, I get lots of emails from people looking for a job and anyone who attaches a resume, I’m not interested because everybody’s got a resume. Send me a short write-up of your best investment idea,” Tilson told Business Insider at the Value Investing Congress last week.

He’s giving some really good advice here.

In this environment, you’ve really got to find a way to stand out from the crowd.

This reminds us of the scene in Oliver Stone’s “Wall Street” when young stockbroker Bud Fox (Charlie Sheen) really wanted to work for Gordon Gekko (Michael Douglas). During a brief interview, Fox pitched a bunch of stock ideas to Gekko.

Of course, we’re not saying give inside information like Fox did in the film, but you get the point: Pitching an idea is the way to stand out.

Take 27-year-old analyst at New York-based hedge fund LionEye Capital Management, Ryan Fusaro, for instance.

Fusaro told Business Insider last week that he would put together investment presentations and send them out to people he respected in the industry.

That definitely shows gumption on his part and people do notice.

He was hired at Lion Eye Capital from a fund of funds about five weeks ago.

SEE ALSO: 27-Year-Old Analyst Ryan Fusaro Wowed Everyone At The Value Investing Congress With His Investment Idea >


A Reader Seeks Advice

I must create a system, or be enslaved by another man’s–William Blake

This reader confronts a quandary that many of you might have faced. Thoughts or suggestions? Advice?  I will post my thoughts later.

A Reader Writes about transitioning to value investing

I have traded equities, futures, and options successfully from a carve-out from a fund. I have spent my entire 11 year career in two buyside proprietary shops. Fortunately or unfortunately, I never had any finance exposure in school or career wise (in the traditional sell-side sense). I graduated magna cum laude from XXX with major in psychology. I have always wanted to become a value investor and run my own fund one day. I currently run my own book now but it is 180 degrees from what value investing is as I’m sure you know being a former trader.

The struggle for me is that I don’t have the fundamental basics down yet for value. I am currently teaching myself basic accounting (I actually had to go back and do a refresher in algebra as well). I’m not an analyst although I use and trade off analysts for work and find the transition difficult in analyzing financial statements, companies, etc. because of my lack of experience. I came into trading without a mentor and had to self teach myself, and find myself in the same position again for value investing.

I have read a lot of the value investing grails like Graham and Dodd, Buffett, Greenblatt, Greenwald, Montier, Klarman, etc., However, putting things together without the basics has been overwhelming and tough for me. I understand the very simple concept of buying with a margin of safety but actually putting that into practice is not an easy task without some guidance.

I am having a tough time learning valuation. When I took Greenwald’s executive course on Value Investing last summer, I understood the big concepts but when we got down to the numbers, such as figuring out WACC, going through items line by line, a lot of things were over my head. I know these are things I gain from experience and learning the basics but it’s been tough trying to figure out what to learn on my own. Another problem is I don’t have a network of people to tap into that are value people. Everyone in my world is fast money whether they are fundamental or not.

I had the fortunate opportunity to sit down and speak to one of the value managers at A Value Investing Firm recently who is also a professor in the Columbia Value Investing Program. I had seriously considered going back to school, but she and I agreed that since I just turned 36 and that there is no guarantee that I will be selected into the Value investing program, that self-instruction may still be the best course for me. I have had a successful run as a trader but I would love to make the transition to Value just as you have. I would love any suggestions you have for me or perhaps we could even get together for a drink. I would be very curious and interested how you made the transition.