Below notes are taken while listening to youtube videos.
Date : 14/October/2020
<<See it again - There are many points>>
Most important things
The most important thing in investing is controlling risk.
The most important thing is buy at low price.
The most important thing is act as a contrarian
Memos are available in Oaktree Capital website for free - Download it.
Personal philosophy comes from what you have taught by parents and teachers and your experiences. Experiences tell you what have been taught and have to be modified.
It is either, the most important badly written book or worst written very important book you will ever read.
Book : Decision making under uncertainty by C.Jackson Greyson
In the world when there is randomness at work. You can't tell from outcome that decision good or bad. In real world good decisions, fail to work all the time and bad decisions work all the time.
You should not act as if the things that should happen are the things that will happen.
If expected value is outcome. Don't think about single outcome, you think in terms of range of outcomes
Should is not equal to will. Lots of things that should happen fail to happen. Even if they fail to happen they fail to happen on schedule.
We cannot live on averages.
Investors should be good enough to go for winners.
AAA bonds are bonds that everybody think they are great. Companies are making lot of money, outlook is good, they have prudent balance sheets and everything is perfect. If everything is perfect it can't get better, if it cant get better than it can only get worse and there is only one way to go, DOWN.
Single B bond, I'd they survive, there is only one way to go for them, UP. On the other side, they can default and file bankruptcy.
Bond investing a negative art
How bond works
you know how bonds work, a bond is a promise to pay. You give me $100, and I promise to give you 5% interest every year, and then give your money back in 20 years. So, it does not make sense to pick and choose a bond, you can blindly pick a bond that pays and that will pay. Only thing that matters is exclude the one that doesn't pay.
Oaktree's Investment Philosopy
Oaktree motto If we avoid the losers, the winners take care of themselves.
First the innovator, then the imitators, then the idiot
Secret to happiness comes from prudence and caution. Its doesn't come from stroke of genius on the easy streak
Date : 06/October/2020
Graduated from Harvard Business School
Attended Anthony Robbins seminar opened a new way of looking at the world.
From that point started figuring out, rule for how to improve my life
Compound interest is 8th wonder of the world.
Compound at any rate, over long period of time, it gets large very very quickly.
You can Compound goodwill over time and it gets large too.
Listen to Charlie Munger talk "24 standard causes of Human misjudgment".
Schldein talks about psychology of human judgement - Power of reciprocation.
I am slightly crazy in that way and when something grabs me, i just do it. Sometimes if it fascinates me, i do it with great intensity. So i set myself a goal of, i think 3 notes a day 5 days a week. Just kept sending it out.
Power of Authencity
The idea of Resonance
Great book by Holldobler and Wilson: Journey to the ants.
Fiction to say we are rational, we are rational in limited circumstances.
I think Im a better investor that I know I am not rational and this is something I have to deal with it and i have figure workarounds to make it better.
Anthony Robbins "Matching and Mirroring" or Mohnish Pabrai calls it Cloning.
Conserve will power for things that count for example exercise in morning afterwards you cannot.
Create habits and behaviours that improve the probability that I will outperform the market.
NoteForMe : compare revenue, earnings and profit of companies in same sector may be read annual reports and get picture to sell or not
Guy's investments rules
If you take S&P during 2009, it was very skewed by some overvalued companies, its sort of Market Cap-weighted index. So more these companies were overvalued, more they had to be in the index, so if you are investing in the index, its more skewed towards the opposite of value investing. Find indexes which are not skewed by looking at 'how the index is constructed'.
Asked warren buffett 'How you deal with envy ?'
WB : I don't know.
WB talks about 'Inner scorecard' idea. Work on something that gives you true joy.
Emotions are call to action.
Envy is a signal, to figure out something wrong in my life that i need to change. Fixing envy is by ensuring we go to bed everynight happy with what we did during the day. If we are not doing that, then we need to try really hard to get to doing that.
Date : 05/October/2020
It is the long-term investor who will, in practice, come in for most criticism. It is in the essence of his behavior that he should be eccentric, rash and unconventional in the eyes of average opinion.
- The state of long-term expectation(1936), John Maynard Keynes
How to NOT Beat the market
Stock selection process
Investment & Beauty
Unique creates a wide and deep moat.
What we look for in a company is 3 things
Market valuation comprises of these 3 circles,
When we overlap all these there are just 125 stocks.
Example: Walt Disney - Owners of unique characters. Mickey Mouse has 3 great qualities: Popularities, immortality and no agent. Keep making Alice in wonderful and jungle book like movies animation. Like you take oil from oil field and come back few years later and full of oil again.
Example: carmax: PE ratio was 24 x in 2007 and 14 x later in 2014 etc. Athough PE ratio has gone down stock has done better. Done better than SPX.
Competitive advantage as investors is Patience, Humility and rationality
Timing of purchases: 80% of success is showing up -Woody Allen
The Rule of 3
If you accept these rules, it will help you prepare psychologically,
"Patience is not ability to wait by keeping a good attitude while waiting." Patience is neither denial nor stubborness. so we try not to get cooked like a frog in boiling water (when temperature is gradually increased).
When stock prices are falling, earnings start to deteriorate, debts are increasing see what's happening to the company that's what is happening to the stock. Just because you like the company don't stay in it.
Good attitude is to focus on what is happening to company(earning improving) and not worry about stock price.
Earnings: In case of Carmax; 2007-17 Over 10 years EPS grew 352% ad and Compund annual growth rate CAGR grew 16 %.
What differentiate an artistic investor from the conventional investor,
A wise investor must be able to balance the inherent dualities in many human activites
What do we do differently at Giverny Capital?
Date : 03/October/2020
Quotes from Sir John Templeton
"PEOPLE ARE ALWAYS ASKING ME where the outlook is good, but that's the wrong question. The right question is: "'Where is the outlook most miserable?"
"lf you want to have a better performance than the crowd, you must do things differently from the crowd."
"Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell."
"MAJOR CAUSE OF HIGHER PRICES is higher prices; but when the trend is reversed, then lower prices lead to still lower prices. To buy when others are despondently selling and to sell when others are avidly buying requires the greatest fortitude and pays the greatest ultimate rewards."
Trouble is opportunity
Tech Bubble : Insiders of the tech companies knew the companies were overvalued. Thing is there is this IPO lockup they cannot sell.
Date : 30/September/2020
We like to buy beach balls being underwaterderwater with water levels rising.
Protect capital against:
Grow capital by:
In order to protect capital, you need to invest, equities gives higher rates of return
Measure ourselves over a period of time that's appropriate, we feel real way to measure yourself is over a very long time period important one and we believe from one market peak to another market peak.
Investment Strategy: Desired Investment Attributes
a. Business with high ROTAs( returns on tangible assets) b. Example consumer staples, low price used on regular basis. They have edge because they can manage capital much efficiently. c. High market share and keeping the capital working you can make lots of money. d. Eg: John Deere tractor business 17 years life cycle whereas toothpaste lasts only a month. So consumers companies handle well.
Investment process of management of the company, when you buy equity, some part you get as dividend and other retained by management for reinvestment that's the wildcard. For long term second part is more important as it gives you more return. Management has 5 basic options on how to use the retained money,
Low Purchase Price
Date : 29/September/2020
Self-Assessment Make a careful exploration of who you are and the work that you've been given, and sink yourself into that Don't be impressed with yourself. Don't compare yourself with others. You must do your creative best with your own life.
One thing. Idea of one thing is that you have clear priority. If you align your priorities over time. You get huge momentum and leverage in your actions. 2inch domino can knock down Eiffel tower.
Compound interest is the eighth wonder if the world. Good habits, diet, financial habits compound. Live on less than I earn and invest the rest. Positive habits and negative habits define us and being aware of them and purposeful in building them is one of the powerful thing you can do. If you start working for your habits, whats beautiful is quickly they will start working for you. Success is sequential not simultaneous. Look at your to-do list on weekly basis and prioritze them. In the todo list always prioritise by numbering them. Work on the one.
What is your WHY
Habits of the Wealthy
Date : 30/September/2020
“I’m no genius. I’m smart in spots—but I stay around those spots.”
— Tom Watson Sr., Founder of IBM
rational : based on or in accordance with reason or logic.
Date : 01/July/2020