Tag Archives: jack schwager

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.

Tutorial on Wall Street and Trading

Because the market is open six and a half hours a day, five days a week , and some stocks are always rising and falling with the news to great fanfare, most new traders think they should have positions open at all times. Experienced traders know to trade only when he has suffiucient kinowledge to make his play an intelligent play. –Edwin Lefevre

Working on Wall Street

Tutorial on working on Wall Street (2.5 minutes) http://www.youtube.com/watch?v=Y2DqFRsPrns

Margin Call: http://www.youtube.com/watch?v=zYQCGgFMrEo&feature=related

The Art of Trading

PLEASE view this video to improve your method of investing. An uplifting lecture on the reality of trading/investing.

A lecture on Market Wizards by Jack Schwager: http://www.youtube.com/watch?v=8SdHlfsA0P4&feature=relmfu This video drives home the importance of why YOU must develop YOUR own method to follow. There are no market gurus for you to mimic.

People are attracted to the markets because they want easy money but all the market wizards share one thing in common: they work obsessively.

Good video from a professional trader Linda Rasche: http://www.youtube.com/watch?v=jodI8XkdyS4&feature=related

Another good interview of a Professional Trader: http://www.youtube.com/watch?v=WM9wMgRPv8U&feature=related

Excellent video on how to properly implement a trade (options): Jack Schwager: http://www.youtube.com/watch?v=OtyexEZ4tYI

Click on the videos by: fooledbyrandomness. Subscribe (button on the top left of the Linda Rasche video) and view his other videos.

The Other Side of Trading

American Greed on a Hedge Fund Manager: http://www.youtube.com/watch?v=j4mGTkcWV2o&feature=channel&list=UL

Margin call on Hitler: http://www.youtube.com/watch?v=eVB-SSkkLnY

We are traders: http://www.youtube.com/watch?v=MwKYjZ_8EcE&feature=related

Psychology of Trading

Can anyone become a trader (Van Tharp) WORTH VIEWING http://www.youtube.com/watch?v=lOBKHij84oQ&feature=relmfu

Psych M douglas http://www.youtube.com/watch?v=GhKJ9P3agRc

An inept trader: http://www.youtube.com/watch?v=JnQGXEyViBY   Note the absence of rationality.

Day trading ruined my life: http://www.youtube.com/watch?v=goABzyuEfYI&feature=related

Stress in the trading room: http://www.youtube.com/watch?v=RmgcbIyajQA&feature=related

Seven habits of a successful trader: http://www.youtube.com/watch?v=HsOfv_QKl2A&feature=related

Promotion for day trading: http://www.youtube.com/watch?v=7JtCF2i2r2M&feature=related

Why traders fail: http://www.youtube.com/watch?v=lFkXllWe3mY&feature=related


Postscript: What does day trading have to do with value investing or long-term fundamental investing? First, you should realize that successful traders have adopted a style for themselves. Good trading is effortless; the process should be effortless, AFTER a lot of preparation. A low or high is made in a day. You can see the psychology behind price movement.