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

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

Like Ashtead Group $AHT, an industrial equipment rental company, which has returned a 21% CAGR over more than 32 years.

1/ Here are some of our favourites: 2/ $ORLY O'Reilly Automotive, the largest auto parts dealer in the United States.

Over the last 31 years, $ORLY has returned a 21.7% CAGR.

In 2011, Chuck Akre gave a speech at the 8th annual value investing conference titled 'The Search for Oustanding Investments'.

"Compounding our capital is what we’re after, that’s what makes it a great investment for us".

🧵 Our 7 favourite insights: 1/ The most important principle is finding compounders:

"Compound return really is the centre point, and ultimately we spend much of our time trying to identify those businesses which are most likely to compound the shareholder’s capital at an above-average rate".

Mauboussin & Callahan recently shared a great paper on identifying forms of increasing returns.

"The concept of increasing returns describes the case when a marginal investment generates an output above the average".

🧵 Our 6 favourite highlights: 1/ Decreasing returns are the default, but there are at least five forms of increasing returns:

• Economies of Scale
• International Trade
• Learning by Doing
• Network Effects
• Recombination of Ideas

in 2016, Morgan Stanley published a paper titled "The Equity Compounders".

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

🧵 Our 6 favourite highlights from the paper: 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".

Michael Burry has successfully predicted 38 of the last 2 recessions.

But one time, he nailed his market call so perfectly, that he cemented himself into stock market history.

🧵 Here are some highlights from his shareholder letters in the run-up to the 2008 crisis: 1/ The US had just started to recover from the aftermath of the tech bubble a few years earlier.

While the foresight of investors pouring money into anything with “dot com” in its investor prospectus was correct directionally, the funding came too hard and too fast.

Mauboussin & Callahan once shared a great paper on how to better understand TSR.

"TSR is the capital accumulation rate that investors earn if they reinvest all of their dividends into more shares of the stock during their holding period".

🧵 Our 8 favourite highlights: 1/ Unlike a traditional measure of total return (price return + dividend return), TSR differs in that it assumes shareholders reinvest their dividends in additional shares.

"A very small percentage of investors are willing or able to earn the TSR".

Dorsey Asset Management recently published a report on competitive advantages, moats, and capital allocation.

It's packed with nuggets of wisdom and gold.

Here are a few of our favourite slides 👇 1/ A small minority of companies enjoy the strongest returns on capital because they create structural competitive advantages or economic moats.

Mauboussin & Callahan recently shared a great paper on the opportunities and limits of pattern recognition.

"Pattern recognition works at the intersection of intuition and expertise - understanding something without conscious thought".

🧵 Our 11 favourite highlights: 1/ Experience leads to expertise only when there is learning guided by clear and timely feedback.

"Pattern recognition works at the intersection of intuition and expertise. Intuition is the immediate sense of understanding something without conscious thought".

Dorsey Asset Management recently published a report on competitive advantages, moats, and capital allocation.

It's packed with nuggets of wisdom and gold.

Here are a few of our favourite slides 👇 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".