Thread by @StockCompounder

Philip Carret lived through 31 bull markets, 30 bear markets, and 20 recessions.

Warren Buffett called him “one of my heroes” and said he had “the best long-term investment record of anyone I know.”

He boiled down his 79 years of successful investing to 12 basic commandments:

But first, a little background on Philip Carret:

After studying chemistry at Harvard, flying a single-seat fighter plane in World War I, and quitting Harvard Business School, Carret became a bond salesman.

From 1922 to 1926 he was a writer for Barron’s where he was one of the first to write about “value investing.”

By 1927 he was chief economist at Blyth, Witter & Co. and ran the firm’s closed-end fund.

Carret founded the Pioneer Fund in 1928 and guided it through the Depression, World War II, the bear market of the 1970s, all the way up to 1983, when he resigned as portfolio manager.

He claimed investing genius consists of one part patience and one part compound interest.

Like Buffett, Carret was no fan of dividends since they are taxable, but preferred companies that could pay dividends if they wanted to.

They may invest their cash flow to expand their business or use it to buy in shares.

He liked companies with low debt, steady earnings growth and a current ratio—current assets divided by current liabilities—of at least 2-to-1.

And he loved to buy what analysts had taken off their buy lists.

”I don’t give a damn what they say,” said Carret.

Carret was the author of The Art Of Speculation, a series of articles written in the 1920s — a century ago — which were then published in book form in 1930.

This was a few years before Benjamin Graham published Security Analysis with David Dodd which came out in 1934.

The book highlighted what Carret called The 12 Commandments for Speculators.

Just as Philip Carret was a role model for Warren Buffett, every long-term investor should take the time to study this legendary investor.

Here are Philip Carret’s 12 Investing Commandments:

1. Never hold fewer than 10 different securities covering five different fields of business.

2. Once every 6 months, reappraise every security held.

3. Keep at least half the total portfolio in income-producing securities.

Consider (dividend) yield the least important factor in analyzing any stock.

5. Be quick to take losses and reluctant to take profits.

6. Never put more than 25% of your portfolio in securities about which detailed information is not readily and regularly available.

7. Avoid inside information as you would the plague.

8. Seek facts diligently, advice never.

9. Ignore mechanical formulas for value in securities.

10. When stocks are high, money rates are rising, and businesses are prospering, at least half a given fund should be placed in short-term bonds.

11. Borrow money sparingly and only when stocks are low, money rates are low and falling, and business depressed.

12. Set aside a moderate proportion of available funds to purchase long-term options of stocks in promising companies whenever available.

Carret didn’t  spend his day trading like a frenetic hedge-fund operator. He didn’t try to time the market, either.

He bought and held.

With over 70 years investing,  Carret learned an essential truth about markets:

“Traders rarely die rich, but patient investors often do.”