Tag Archives: Mastery

A Reader Seeks Guidance


A Reader Asks for Guidance (edited for brevity)

I’m writing this e-mail to ask for advice, as I value your opinion.

I’m 22 and graduated in Psychology. I moved to New York back in March as everyone said this was the place to be to get a job in finance. Since then I’ve been networking a lot, learning, and pretty much bugging every fund manager I’ve managed to get a hold on.

Attached you can find my current security analysis template; in Word and Excel (tables). I’d appreciate any feedback on anything to add. 

I’m writing to you as I’m almost down to the penny (excluding my investing capital which is untouchable) and I need actionable advice. I’ve been crashing at a girl’s place in Brooklyn for the last 2 months and down to $400.

For write-up purposes, looking at equities, I still believe ESV and CLD are among the best plays.

ESV is currently the only driller making a profit and management has proven wise. It’s a good play for both safety and capital gains. The same could be said about CLD.

Looking at bonds, I haven’t analyzed them quite as much as equity opportunities since I can’t invest there yet. However, from a glance at the BTU bonds trading at around 34 cents and maturing on Nov. 15 18, they seem as potentially worth a closer look. BTU’s dominant size, presence and assets makes it unlikely to go through a disastrous formal chapter 11, so if it goes through an out of court restructuring or simply plows through, you’re seeing either full recovery or getting new equity in the restructured entity. It seems as a similar play to the equities I’ve looked at, albeit less secure. Can’t say the same on the BTU equity.

I would really appreciate any actionable advice you have for me. At this point I’m even willing to mow the lawn of whoever takes me in (funny, but true). 

Thanks for reading such a long message, and thanks again for sharing your knowledge. Your advice and the Deep-Value group’s really helped me both intellectually and psychologically as I was feeling a bit bummed out.

John Chew:

Dear D (name withheld)

I am not quite sure what you are asking advice on:

Your investing templates, stocks, and/or job/career advice.


First, I did not post your templates here for others to see and comment on because of privacy, but I do think you put alot of effort and thought into constructing them.   Just remember John Templeton’s advice to his analysts, “We want our analysts to adopt whatever approaches are appropriate to a particular situation.”    Use your templates as a guide but don’t cut and paste.

There are many in the Deep-Value group with varied experiences who could give you their thoughts.   I find it is hard to give advice not knowing the person well.   The key is knowing yourself which can be difficult for a young person starting out.  You seem to have a passion to learn and become an investor, so you are part way on your journey, but you have much to learn (as we all do).   You have met other money managers and what has been the response?   I can promise two things:

No one trains you on Wall Street and you have to show what you can do.   In your case, that would be a well-written research report on a company or an industry to show an employer your through process and skills.  You need time to develop your skills–about five years.

Do you need to be in an expensive city like New York or even work on “Wall Street?”   I place Wall Street in quotes because I mean the investment business.   Could you work as an assistant to a CFO at a small growing company?   Would you think of working as a broker or back office clerk to get your foot in the door.  You could work in a job to keep food on the table while you constantly build your skills and a track record no matter how small and keep networking.  Francis Chou did this while he worked at a telephone lineman (Francis Chou)  But again, easy to give advice while not knowing all your alternatives.

Perhaps think through EXACTLY what advice you want, but other people reading this can also provide their thoughts.

Cheer up, I remember being broke and staring up at the ceiling in an Indian brothel and wondering how the hell would I ever survive?

If you are seeking ways to becoming a master investor/analyst, the road is a long but rewarding one:

Pavel Datsyuk https://youtu.be/gpDdaC1_UGg

Jordan on fire: https://youtu.be/hYntar_qeVk?t=41s

Keith Moon: https://youtu.be/NJH8DmPfVmU



Question from a Reader–The Best Way to Improve Your Skill as An Investor

Question from a reader

There seem to be two courses of action in trying to apply the lessons learned via your website to improve your skill as an investor. The first is to do an in-depth study of a single company, its industry and its competitors. The second option is to read as many 10-Ks as possible and do quick and dirty valuation similar to those found in, say, Greenblatt Class #5.

Which option do you see as more valuable? Am I missing a third way?

Great question and I will elaborate more as this blog develops.

Mario Gabelli advises students to pick one industry and study that thoroughly then after 3 to 4 months move on to another industry. Buffett started by pawing his way through Moody’s manuals and Value-Line to find cheap asset stocks like cigar butts. Munger influenced Buffett with Sees Candy to look at high quality businesses.

After you have read the obligatory required materials like Buffett’s shareholder letters, his Buffett Partnership letters, Margin of Safety, The Intelligent Investor, the Greenblatt books and lecture notes, you need to build from there. My interest and suggestion would be to find 6 to 8 compounding machines which can be bought at a discount.  If you can find a few high return on capital companies that are able to redeploy that capital for several years at high rates, you will have outstanding returns. These companies are rare that is why you must be patient to find them and to hold them.  But you must know what to look for.  You should become an expert in how companies develop and maintain competitive advantages. This will help you in searching for great investments and give you confidence to hold them for a while.

For example, if you understand regional (geographic) economies of scale you could focus on service companies like waste hauling and disposal or rock aggregates or health care providers and notice if they dominate their particular regions. Do you see high returns on capital? Study these companies and wait for them to go on sale.  Rather than wait for blow-ups and disasters to study companies, find the best emerging companies you can find, study them regardless of price then wait for your opportunity.

Take a look at the last case study on charlie479.  He epitomizes what I am talking about.  Read broadly and deeply about businesses—10-Ks but books and autobiographies too.  As you learn more about competitive advantages you will see connections in other businesses. You will see companies losing their advantages but look for companies that are successfully entering against incumbents. Look at niche companies that can dominate smaller markets.   Read, read and read.

Next week I will post the best company analysis in the world done by Charlie Munger.  If you can learn how he views business problems then you will grasp what is most important in business analysis.

You can buy cheap assets in special situations where management restructures the debt or assets and you get a nice bump up in price, then you must redeploy your capital like a merchant into another asset play.   This can be profitable and relatively low risk but the big money is made sitting on fantastic businesses that are compounding at high rates.  I would focus there. Few investors study competitive advantages–I mean become an expert at spotting and understanding great companies.

Fire away with more questions.