In 1991, Seth Klarman wrote a book, Margin of Safety, that is rumoured to only have printed a few thousand copies.

No longer in print, but packed with insights, Klarman said he “endeavoured to make the book timeless".

🧵 Our 9 favourite lessons: 1/ The 80/20 rule:

"The first 80 percent of the available information is gathered in the first 20 percent of the time spent. The value of in-depth fundamental analysis is subject to diminishing marginal returns".

In several of Peter Lynch's old books, he shared a charting technique later dubbed the "Peter Lynch Chart".

"A quick way to tell if a stock is overpriced is to compare the price line to the earnings line".

A quick guide to producing these charts in Koyfin 👇 1/ These charts are sometimes referred to as "Fair Value" chart lines, where you plot a range of constant valuation multiples to visualise where the company trades in relation to those bands.

Example: Apple trades at 8.9x sales with a 10Y mean of 4.9x sales.

Here are 8 companies trading close to their lowest valuation in a decade:

1) $AMZN Amazon

Market cap: $2.1 trillion
PE: 41.4x
PS: 3.2x
EV/EBIT: 33.7x 2) $DGE Diageo

Market cap: £56.4 billion
PE: 17.1x
PS: 3.5x
EV/EBIT: 15.6x

In 1979, John Train wrote a profile of a young man named Warren Buffett; then aged 48.

The conversation covers his coming of age as a young adult, his relationship with mentor Ben Graham, and how his investment process transformed over the years.

🧵Our 6 favourite highlights: 1/ He felt the largest advantage any individual investor has is their ability to wait for the right pitch.

Not restricted by mandates, LPs, or other external forces.

Sometimes, it is the most ordinary and boring business that boasts incredible long-run performance charts.

Here is a curation of some boring businesses with excellent LT returns.

1/ Cintas $CTAS, uniforms and soap, scrubs up nicely at 18.6% CAGR over 41 years. 2/ Waste Management $WM

Garbage disposal with pristine returns, compounding at 9.7% over the last 33 years.

In 2019, Li Lu of Himalaya Capital gave a presentation to a group of students titled 'The Practice of Value Investing'.

It's packed with nuggets of insight and is well worth a read.

🧵 Our 7 favourite highlights from the paper: 1/ Li Lu asks "Why do so many people understand value investing but so few practice it?".

He breaks the basic components of value investing into four concepts; stocks are ownership, margin of safety, Mr Market, and the circle of competence.

In 2020, Akre Capital published an essay titled "The Art of Not Selling".

"Of our most costly mistakes over the years, almost all have been sell decisions. The mistake, in virtually every instance, has been selling too soon".

🧵 Our 6 favourite highlights from the essay: 1/ Compounding is not obvious and requires patience:

"I say not-so-obvious because you would have been better off taking the one million dollars until the 27th day. But in those final 4 days, the value of the penny increases from less than $700,000 to more than $10.7 million".

In the late 1980s, Phil Fisher gave a rare interview shortly after the 1987 Black Monday crash.

He discussed avoiding popular stocks, management, circles of competence, waiting for big payoffs, retirement, hyperinflation, & market crashes.

🧵 Our 7 favourite highlights: 1/ Fisher was known to run a concentrated portfolio most of the time, here's why, in his own words:

"I don’t want to spend my time trying to earn a lot of little profits. I want very, very big profits that I’m ready to wait for".

Mauboussin & Callahan recently shared a great paper on valuation multiples.

"The main point is that multiples are getting worse at reflecting the economic picture they are supposed to capture".

🧵 Our 5 favourite highlights: 1/ The limitations of multiples:

"It is common for the growth in perpetuity to assume a growth rate that is too high".

In 1991, Seth Klarman wrote a book, Margin of Safety, that is rumoured to only have printed a few thousand copies.

No longer in print, but packed with superb insights, Klarman once said he
“endeavoured to make the book timeless".

🧵 Our 9 favourite lessons: 1/ The 80/20 rule:

"The first 80 percent of the available information is gathered in the first 20 percent of the time spent. The value of in-depth fundamental analysis is subject to diminishing marginal returns".

In 2010, Seth Klarman described 20 lessons from the great financial crisis of 2008 that he felt “were either never learned or else were immediately forgotten by most market participants.”

🧵 A summary of those lessons: 1. Things that have never happened before occur with some regularity

2. Be wary of lax lending standards

3. Consideration of risk must never take a backseat to return

4. Risk is always relative to the price paid

5. Reality is always too complex to be accurately modelled

In 2006, Bill Miller provided a masterclass on investing during a speech at the CFA convention.

It covers a LOT of ground, including; defining value, batting averages, earnings quality, value traps, hiring mistakes, position sizing, and more.

🧵 Our 9 favourite highlights: 1/ Weighing historic valuation too heavily:

"As I tell our analysts, 100 per cent of the information you have about any business reflects the past, and 100 per cent of the value of that business depends on the future".

In 2023, Dorsey Asset Management published a Masterclass on competitive advantages, moats, and capital allocation.

It's packed with nuggets of insight.

🧵 Our 5 favourite highlights: 1/ Why Moats Matter

"An extended period of excess ROIC increases business value by lengthening the period during which capital can be reinvested at a high NPV".

The paper titled "The Equity Compounders" was published by Morgan Stanley in 2016.

"These compounders have generated superior risk-adjusted returns across the economic cycle".

🧵 Our 6 favourite highlights: 1/ What is a compounder?

"High quality, franchise businesses, ideally with recurring revenues, dominant & durable intangible assets, pricing power and low capital intensity. We focus on franchise quality, durability, financial strength, industry position, & management quality".

In 2012, Pat Dorsey sat down with the MOI to discuss moats.

It was a masterclass in understanding, discovering, and analysing moats.

🧵Our 7 favourite takeaways: 1/ The definition of a good moat:

A structural competitive advantage that is inherent to the business and sustainable.

"A company with a very hot product and a cool brand right now may have very high returns on capital, but the sustainability is in question".

In a classic 1985 interview, Warren Buffett, then worth ~$500m, sat down with George Goodman to discuss what is important in the game of investing.

This is just timeless content.

🧵Our 5 favourite takeaways: 1/ What Do You Do Differently Than 90% of Money Managers?

"The real test of whether you're investing from a value standpoint or not, is whether you care whether the stock market is open tomorrow".

In 2016, Nick Train sat down with Value Research to discuss why he describes himself as “permanently bullish”.

The interview contained great commentary on technology changes, market cycles, philosophy, and when to sell.

🧵 Our 6 favourite takeaways: 1/ Why Train thinks being permanently bullish is right for him:

"Eventually I acknowledged the, for me, futility of such guesswork about market levels & concluded that it makes good commercial, investment and perhaps most importantly emotional sense to be permanently bullish".

Last month Aswath Damodaran sat down with the Financial Times to discuss investing as an act of faith.

It contained great commentary on regret minimisation, bubbles, investment philosophy, valuation, and the current state of the equity market.

🧵 Our 5 favourite takeaways: 1/ Rates are "where we ought to be".

"I’m going to say something that’s going to sound weird: a market with a T-bond rate of 4 per cent is much healthier than a market with a T-bond rate of 1.5 per cent. People don’t feel the urge to do stupid things".

Mauboussin & Callahan recently shared a great paper on investing in the era of "easy money".

The paper examines the behaviour of public companies in a period characterised by low interest rates and when "financial capital was cheap and abundant".

🧵 Our X favourite highlights: 1/ The paper looks at two eras; the easy money period of 2009 to 2021, and the 13 years before it.

"All things being equal, declining interest rates are good for asset prices because future cash flows are worth more when they are discounted at a lower rate".

In 2019, Li Lu of Himalaya Capital gave a presentation to a group of students titled 'The Practice of Value Investing'.

It's packed with nuggets of insight and is well worth a read.

🧵 Our 7 favourite highlights from the paper: 1/ Li Lu asks "Why do so many people understand value investing but so few practice it?".

He breaks the basic components of value investing into four concepts; stocks are ownership, margin of safety, Mr Market, and the circle of competence.

Did you know that Europe has their own Mag 7?

1/ Dubbed the “Granolas” by Goldman Sachs in 2020, this basket was chosen because it echoed themes present amongst the Mag 7 (then called “FAAMG”).

• Market leaders
• Outperformed the index
• Earnings power outpaced peers 2/ Accounting for more than 50% of the gains in the STOCK 600 Europe Index over the last 12 months, this group consists of:

🇫🇷: LVMH, Sanofi, L’Oreal
🇨🇭: Novartis, Nestle, Roche
🇬🇧: GSK, AstraZeneca
🇳🇱: ASML Holding
🇩🇪: SAP
🇩🇰: Novo Nordisk