Meb Faber
When Buffett closed his early investment partnership in 1969, he advised his investors to place their money in the Sequoia Fund, (Location 204)
The Tweedy Browne family of funds is another good example—in fact, several employees of the old Graham-Newman partnership founded the firm. (Location 206)
hedge fund has an average of 66 percent of its assets invested in its ten largest positions compared with 31 percent for the typical large-cap mutual fund, 22 percent for a small-cap mutual fund, 21 percent for the S&P 500, and just 3 percent for the Russell 2000 Index. (Location 374)
Why shouldn’t I just pick the top stock? Isn’t that a manager’s best idea? We have found that the top pick is usually the worst performer out of the top ten holdings, and we discuss this topic more in depth later in the book. By the time the position becomes the largest holding, it is often due to appreciation and not necessarily conviction. (Location 403)
“We focus on what is knowable, starting with the truth that the investment process consists chiefly of purchasing future cash flows at a discount to their estimated value today.” (Location 548)
“If we find a great business, the only way it becomes a great investment is if management directs the marginal dollar of free cash flow to its highest-return purpose,” (Location 577)
Specifically, it tends to invest in businesses with price/earnings and price/book ratios below the market, but with dividend yields that are substantially above the market. Barrow Hanley has always emphasized the importance of dividends. (Location 599)
Barrow Hanley is a sub-advisor on more than thirty mutual funds, including the Vanguard Windsor II Fund, which has received much publicity in the financial press. On average, the Windsor II Fund has performed well since its inception in 1985, beating the Russell 1000 Value Index and keeping pace with the S&P 500 Index, but with less volatility. (Location 604)
Like many value investors, Klarman likes to slowly build up concentrated bets, and he accepts long holding periods of three to five years. (Location 632)
“Investing is the intersection of economics and psychology,” Klarman said. “The economics—the valuation of the business—is not that hard. The psychology—how much do you buy, do (Location 637)
you buy it at this price, do you wait for a lower price, what do you do when it looks like the world might end—those things are harder. Knowing whether you stand there, buy more, or something legitimately has gone wrong and you need to sell, those are harder things. That you learn with experience. You learn by having the right psychological makeup.” (Location 638)
In Margin of Safety, Klarman credits his success to the Graham-Dodd model, claiming that one must be willing to walk away from an alluring investment should careful scrutiny reveal that the investment does not provide sufficient room for error. (Location 642)
Cooperman’s investment philosophy is fairly straightforward. He describes what he does as searching for “above-average businesses trading at below-average prices.” He uses deep fundamental analysis and makes a point of meeting and evaluating company management. (Location 744)
“We try to strike a balance between fully understanding the business and also spending a lot of time on valuation,” he once said. “A lot of people focus primarily on the numbers and buy things that are cheap, while a lot of others just buy good businesses and don’t worry as much about the numbers. We try to do both equally, and as a result, I think we make fewer mistakes.” (Location 756)
ideas, Eminence seeks discounts that may be caused by a number of different factors. In particular, it looks for three different types of opportunities. First, it is on the lookout for good businesses that may suffer because they are part of a temporarily neglected industry. Second, they scout opportunities in otherwise strong companies that have recently reported disappointing short-term (Location 820)
earnings, especially if the company’s long-term value remains unimpaired. Finally, Eminence searches for good companies that may fly under other analysts’ radars, often because their attention is focused on other industries or because the business is in the process of undergoing a special situation, such as a spin-off. (Location 823)
But unlike many others in the value game, Sandler is willing to invest at a much smaller perceived discount if he believes he is buying a high-quality company with solid future potential. (Location 830)
He likes to hold major positions for eighteen months to two years, but he closely monitors volatility in search of both buy and sell opportunities. (Location 834)
Lakonishok spent years doing academic research into behavioral finance. He concluded that investors tend to rely too much on the past when trying to predict the future, they overpay for good companies, they ignore statistics, and they develop mindsets about companies that affect their decisions. (Location 971)
he used a fairly straightforward approach to making stock picks. “I look for stocks trading at low multiples of cash flow,” (Location 1056)
The investor could simply take the top ten holdings from each fund and update the portfolio in the same method as before. (Location 1317)
For most of the managers we include in the book and the Appendix the worst idea is to track or include the top holding. It is by far the worst performer! (Location 1335)
He likes to hold positions for one to three years. Maverick uses a bottom-up approach to stock picking and aims its long bets at companies that it estimates will outperform the market by 20 percent on an annualized basis. (Location 1427)
I looked at the ten most popular positions across the Cubs to see how that portfolio would have performed. Not surprisingly: great! (Location 1481)
For those that don’t want to track and trade 13F strategies themselves, there are a handful of funds, public and private, that are managed by professional investors tracking 13F strategies. A few companies, such as AlphaClone, Novus, and Global X, manage portfolios through separate accounts, private funds, and ETFs that are based on 13F concepts. (Location 1545)