Thread/ 'Reflections on the Ten Attributes of Great Investors'

In 2016, Michael Mauboussin wrote an article reflecting on 30 years of researching the greatest investors and identifying the traits made them successful.

Below is a summary of the ten attributes he identified 1/ Be numerate (and understand accounting).

To be a successful investor, you have to be comfortable with numbers. There are rarely complicated calculations but a feel for figures, percentages, and probabilities is essential.

2005 short pitch on Monster Beverage.

$MNST was trading at 25-30x fwd earnings, 16x BV, and 23x EBITDA while facing a fears competition on a seemingly faddish product.

Compelling, isn't it? Yet decades later, $MNST is in 100-bagger+ territory.

Worst short ever?👇

1/ $MNST's case is one of my favorites to look into among all the multi-bagger cases presented here before.

True testament to how hard it is to catch onto ideas like this and hold onto them for dear life to turn the stock into the biggest career winner.

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‘Nick Sleep on Diversification’

Below is a collection of Nick Sleeps’ comments on concentration vs diversification, from the Nomad Investment Partnership letters.👇 1/

“The church of diversification, in whose pews the professional fund management industry sits, proposes many holdings. They do this not because managers have so many insights, but so few! Diversity, in this context, is seen as insurance against any one idea being wrong”…

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Peter Lynch popularised the concept of EPS growth driving stock returns, which is backed up with academic literature.

Over the very long-term, 20+ years, EPS growth is by far the main contributor to returns.

But what about for a more typical investment of ~5 years? 2/

As much as we all want to hold a stock for 20 years, the average holding period is just ~6 months. So a more realistic ‘long-term investment’ is 5 years.

Over 5 years, EPS growth contributes to ~40% of returns. Multiple change contributes to over half of returns.

Another GOAT VIC pitch from 2002, this time on a little company called $NVDA.

In Sep '02, $NVDA was a $2 billion market cap company trading at 14x LTM EPS while being the #1 player in a GPU duopoly with an 83% sales CAGR in 5 years.

Since then, NVIDIA generated a 571x return👇

1/ At the time of the pitch, $NVDA was cheap due to several one-off issues, including an SEC probe (resulting in relatively immaterial revisions), a pricing dispute and ongoing arbitration with $MSFT, an inventory write-down, and a delay in its next-generation chip.

One of the best VIC pitches ever.

2001 pitch on Apple Computer.

The core $AAPL operating business was valued at $597 million, or about 0.1x expected next year sales.

Most importantly, 87% of Mcap was in cash and marketable securities. 👇

Part of the undervaluation was likely due to significant cash hoard and many investments in other tech companies.

Especially, considering that most of the authorized 1999 buyback plan worth $500m was not still put to use.

Shelby Davis is probably the least-known great of value investing school.

Davis started investing at 38 years old with just $50,000. By the end of his career, he turned that into $900 Million!

He averaged 23.2% annual returns over 47 years! 👇 1/

$1 compounded at 23.2% over 47 years amounts to $18,143!

Shelby Davis’ returns are arguably the best long-term returns ever. Only comparable to Warren Buffett or maybe Walter Schloss.

If Davis began investing earlier in life, he would likely be the greatest of all-time.

1/ Thread on the greatest capital allocator in history.

Henry Singleton.

Founder & CEO of Teledyne from 1960 until 1986. Teledyne is an industrial conglomerate with interests in insurance, special metals, aerospace electronics and even dental appliances. 👇 2/ He Graduated from Massachusetts Institute of Technology (MIT), where he earned his Bachelor’s, Master’s, and Doctorate of Science in electrical engineering.

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Every quarter we get a look into what the best investors in the world are buying and selling as they file their 13F’s.

Here are some of the most noteworthy super-investor activities this quarter 👇 1/ Berkshire continues to buy into $OXY while starting to bet on homebuilders with $NVR, $LEN.B, and $DHI additions in Q2

On the other hand, quite a bit of selling by $BRK, including reduced positions in $GM and $GL, as well as a complete sale of $VTS, $MCK, and $MMC.

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Warren Buffett on special situations and activist investing.

Before Buffett became a long-term GARP investor, he was more focused on special sits, illiquid, small-cap, deep value positions. He was even interested in companies he could take control of. 👇 1/

Interestingly, Buffett's best returns came during the late 50's to 60's when he had a much different approach to investing.

This thread is a series of quotes from Buffett's 1961 partnership letter where he describes some of the opportunities he is looking for at the time.

🧵Joel Greenblatt is one of the most influential investors in recent history, whether it's his founding of VIC, the release of his books, or his Columbia class notes.

Here is a brief overview of his key investing principles.⬇️ 1/ While studying the footnotes is crucial, the big picture is most important: Earnings yield and ROIC are the two most important factors to consider, with the key being figuring out normalized earnings.

New Idea Hive weekly newsletter is out!

Packed with 5 actionable ideas from Value Investors Club and hedge fund letters👇 $ABR (short) - mortgage REIT, which is about to face significant markdowns on loans, dividend cut, and dilutive equity raise. Common equity is likely to be seriously impaired or wiped out.

🧵 The book that Warren Buffett memorised as a child.

"Very early, probably when I was seven or so, I took this book out of the Benson Library called 'One Thousand Ways to Make $1,000’. I pretty much memorised it”
- Warren Buffett

Here’s a synopsis of the book ⬇️ 1/ "One Thousand Ways to Make $1,000" is a classic book on personal finance, first published in 1936 by author Francis Minaker.

The book is filled with inspiring stories of people who have successfully made money using a variety of creative strategies.

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A series of polls on the probabilities of outcomes in investing.

I feel most investors are overly confident and unrealistic in considering different probabilities of outcomes.

Take the test ⬇️ 1/4

What probability do you assign to your portfolio being worth more in 5 years from now?

🧵 thread/ In 1939, as WWII was starting, John Templeton was buying US stocks while everyone else sold.

60yrs later in 1999 when everyone was buying, Templeton was short 84 of the most expensive tech stocks.

Below are 6 of Sir John Templeton’s investing principles ⬇️ 1/ Don’t get let astray by the emotions in investing – We should not be excessively careless and optimistic when we have big profits and excessively pessimistic and cautious when we have big losses.

🧵Thread/ My Investing Checklist.

In the past, I have always ‘memorised’ my investing checklist, or even worse, I write down extensive criteria with 100’s of items. Never to be read again.

This thread is an attempt to create a simple 10-point checklist. ⬇️ 1/ Is there a highly-competent, trustworthy and aligned management team with a history of exceptional capital allocation?

🧵Thread/ 2022 was an outlier year for the stock market. In a period full of uncertainty it’s interesting to see how investors react.

This made the Q4 13F filings of super-investors particularly interesting.

Here are some of the notable trades from the best investors: 1/ Michael Burry buys $BABA and $JD at what appears to be the bottom, at least temporarily.

During a time Chinese stocks were even more out of favour than they usually are, Burry was buying.

He also bought $BKI, $COHR, $WWW & $MGM.

🧵Thread/ 'Reflections on the Ten Attributes of Great Investors'

In 2016, Michael Maubossin wrote an article reflecting on 30 years of researching the greatest investors and identifying the traits made them successful.

Below is a summary of the ten attributes he identified ⬇️ 1/ Be numerate (and understand accounting).

To be a successful investor, you have to be comfortable with numbers. There are rarely complicated calculations but a feel for figures, percentages, and probabilities is essential.

🧵In 2002, Michael Burry wrote a thesis on Value Investors Club for a Mexican poultry producer $IBA

In this thread, I'll summarise his write-up. Over the next 5 years the stock price was up ~260%. If we include dividends, the IRR for the 5 years was ~32%.

1/7 In 2001, Industrias Bachoco generated $1 Billion in revenue. It was the leading poultry producer in Mexico, where chicken is the number one meat. $IBA operated in a highly-fragmented market.

$IBA was a NYSE-listed ADR that Burry though was "very cheap".

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🧵We all know Ray Dalio as the founder of Bridgewater Associates, one of the world's largest hedge funds with ~$160 billion in AUM.

But did you know that he played a key role in the launch of one of fast food's most iconic menu items - the McDonald's chicken McNugget? ⬇️

1/6 In the early days of Dalio's career, fresh out of Harvard Business School with a specialization in trading commodities, he landed a job on Wall Street before launching his own firm, Bridgewater, in 1975. Among his early clients were McDonald's and a major chicken producer.

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🧵 Ben Graham's '7 Rules of a Defensive Investor'

In the 'Intelligent Investor', Graham outlines a simple strategy and clear guidelines for an investor that wants to conservatively grow capital.

He even created a simple valuation formula, now known as the Graham Number. 1/ Graham describes two types of investors.

The Defensive Investor, and The Enterprising Investor.

The Enterprising Investor is determined to apply their knowledge and expertise to investments, while the Defensive Investor aims for long-term returns and minimal volatility.