Quality Investing

What if we make the link that people drive good business and then we got the (in)famous bottom line "E" so we finally have our estimated multiple? Then, value investing is all about people and corporate culture after all! Have you thought of that?

Henry Singleton, Outstanding Capital Allocator

I first heard of Henry Singleton, CEO of Teledyne by reading The Outsiders: Eight Unconventional CEOs and Their Radically Rational  Blueprint for Success, which shares the stories of great capital allocators of all times. Then, I received this presentation about him presented by Leon Cooperman from Omega Advisors in the Value Investing Congress of 2007.

Singleton was able to buy over 100 companies in the "Conglomerate Era" and then, in the '80s, reaped the benefit of shrinking the total share count from 40 million to 12 million shares, without using debt, at low multiples.

His entire strategy used very little debt, with return on assets being very close to return on equity (ten-year ROA of  18,1% versus ten-year ROE of 19,3%). Despite not being a MBA student, he taught us a outstanding class on financial engineering.

Seth Karman - Margin of Safety

For those who haven't read the book from Seth Klarman which is still being sold from US$ 999 to US$ 2.000 at Amazon, here is a short list of the main ideas from the book. Hope it helps!

Seth Klarman - Don't be a Yield Pig

In 1992, Seth Klarman worte an article to Forbes called "Don't be a yield pig". As current market participants complacency has risen to amazing levels, it seems this 21-year old article is from last week. Definitely it's worth to dedicate 5 minutes to read it.

Richard Feynman - No Ordinary Genius

As the title says, Feynman was no ordinary genius. His endless curiosity, questions and imagination enabled him to never stop. He also confessed he has never frozen because he didn't know something, on the contrary, that motivated him.

With all his humbleness and tremendous willpower, he was able to think independently, using the art of storytelling, simple examples and qualitative/conceptual thinking in order to explain complex problems. Also,  geometric visualization skills helped him a lot.

Pieces of advice are "use your brain"and "read everything you can". Quoting Li Lu's interview in the last Graham & Doddsville newsletter, "know what know, know what you don't know, know what you don't have to know and there are always unknow unkowns."

Don't miss the opportunity to check out this documentary on Feynman's life.