One contemporary value investor I’ve learned a lot from, and look forward to read, is John Huber. John is the portfolio manager of Saber Capital Management, LLC, an investment firm that employs value investing strategy with the primary goal of patiently compounding capital for the long-term. He also writes about investing at Base Hit Investing.
I had interviewed John for the May 2016 issue of our Value Investing Almanack newsletter, and he was very generous in sharing his insights from his long experience as a value investor. Last week, I came across his 2016 letter to clients of Saber Capital, and was hooked instantly.
In this letter, John has shared some of the simplest yet profound thoughts on the practice of successful value investing. Despite their profundity, these thoughts have been forgotten and often ignored by investors who have seen their attention spans and investment horizons getting shorter and shorter.
I have read John’s letter a few times ever since I came across it, and have made some notes on the subject matter he has written about. These notes won’t add much value to you as compared to the thoughts originally shared in this letter, but these are just some things I keep reminding myself. And I believe John’s letter and my notes may help you just in case you give serious thought to them and want to put them to practice.
Click here to download my note’s on John’s letter, or click on the image below…
You see, it’s important to do simple things in life and investing for, as a wise person once said, one day you’ll look back and realize they were the big things.
The above letter from John and my notes to it all point to the simple things you must do to make better investment decisions. Now it’s up to you.
Let me know your thoughts on my notes (esp. something I may have missed) in the Comments section of this post.
Wonderful letter, incisive analysis!
Glad to know that, Anirudha. Thanks!
I agree with you on this Anirudha. The analysis was in-depth and informative.
Great share Vishal!
Best,
Akshay Chugh
Thanks Akshay!
Very nice analysis Vishal. Probably you can add this analysis to the master mind course[at the end].
Thanks Praveen!
Brilliant……keep up this type of teaching…..
Thanks Brad!
Great Analysis Vishal . Keep it up .
Few Questions to ponder .
1) All Fund Managers talk about investing in ” BEST BUSINESS @ FAIR PRICE ” ( right from Graham days – if you read any 1950s / 1970s investors MAG they will tell you same ) – So why they don’t succeed ??
2) Time Horizons of Most Mutual fund is long . See how long they are holding on to Infosys , HDFC twins , ITC etc – & Metrics like FCF , ROCE etc are closely monitored
So where is the ALPHA ??
1) Information Adv : Seeing what is unseen -> A lot of time we refuse to see Obvious Fact inspite of it being so close to us ..
2) Analytical Adv : Knowing what to analyse is key ( Every Business requires different metric and that changes across its lifecycle and business cycle – One needs to Run a Business to understand this )
3) Time Arbitrage : There are not just two ( short term 10 years ) . There can be many time slabs and each time slabs requires different metric . Like for short-term – Information & Technical analysis can come handy -& for Long term ( Business & Moat Understanding is key ) … Similarly there are different metrics for 1- 3 years , 3-5 years , 5-8 years etc . People has to decide where they want to play .
Hope you write some articles on Number of options people have to compete and going beyond blindly following Warren Buffett / Soros / Ben Graham etc…
Regards
Shailesh
Thanks Shailesh!
1. Investing, as they say, is simple but not easy. So even when the rules have been laid out for decades, most people chasing quick riches from the stock market don’t have the mindset to go slow. And that’s why most don’t succeed.
2. Time horizon of most funds isn’t long, but short. See the portfolio churn of moost schemes and you would know. While many hold on to their top holdings (like you mentioned) for some time, they are playing around with the rest of the portfolios and thus most funds end up under-performing even their benchmarks. That is where investors eyeing the long run have an edge.
3. Yes, we all suffer from inattentional blindness bias. We don’t notice what we are not looking for. But even when people are looking to eke out that last bit of information on companies, this edge is short-lived as many others get this information even if after a short time lag.
4. Having an analytical bent of mind is key, and as you rightly mentioned knowing what to analyse is important. So this is some edge, but not a sustainable one.
5. When it comes to benefiting from time arbitrage, people benefit by only having a long term view. You may use technical analysis and take short term calls on stocks etc. But see the kind of stress you take while doing this, which is unlike having a long term view (an educated one), and then letting the business take care of the returns you may make. Of course, people must decide whether they have the capacity and temperament to think and act long term.
Regards,
Vishal
thanks for reminding us time and time again, for long term lost wisdom due to short term thinking.
Thanks Rajesh!
Thank you, Vishal for excellent note, and pointer to the Annual Letter. I read the letter first and then your analysis. I must say doing this added to so much additional knowledge. Cheers!
Glad to know that, Ketan. Thanks!
Dear vishal,
I had subscribed for your financial statement analysis course on 6 February 2017.
Could you please tell me when this course will start?
Hi Sidharth, I’ve already send the details to your registered id. Thanks!
Dear Vishal,
Thanks a ton for bringing up these insights.It is not less than reading an entire book, above that your comments are like icing on the cake.
Most crisp and simple way to talk about “Edge” and an investment checklist.
I always look forward to your mail and I am glad to see my transformation from a speculator to an investor.
Whenever you or Anshul write something, it always feels like most friendly discourse.
This helps to understand the ambiguous info and strategies in the simplest manner.
In your simplistic approach you are making investment joyful & effective.
kudos to your parent for this fine upbringing.
regards
NixRishi
So glad to know that, Rishi. Thanks for your kind words. Regards.
Superb notes Vishal, had fun reading it.
Meanwhile, do we have such funds and portfolio managers in India 🙂
Thanks Sachin! Hard to find them 🙂
Priceless. God bless you.
Thanks Naveen!
Wonderful post. Most insightful.
Thanks Ravindra!
Wow Vishal! That letter was really a good read.
I didn’t think of reading it initially but I thought of giving it a try and it is one of the best thing I have read on your blog.
Do share more letter like this on future. (Please do a warren Buffett letter version of this also. Please!)
Glad to know that, Ankur. Thanks!
Great Letter.Now we know what our edge is 🙂
It further encourages me to invest for long horizons and value stocks
you are making a difference and should be proud of it 🙂
Dear Vishal,
This is a wonderful article, thanks for taking the effort to write this up and share with us. The need for long term thinking needs to be emphasized again and again, as it is human nature to get distracted with what is currently gaining significance in the media, and in collective circles.
For me, this was a great reminder to re-focus, relax, and look at the soundness of my investment process.
Warm Regards,
Rajaram