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?