Stock Market Investors

[…] Our solution to these circumstances is running a concentrated portfolio of stocks that could be attractive to investors for reasons separate from the movement of the stock market itself. Oil and gas shares are offering an addictive legal drug and should do well in an inflationary environment where interest rates return equity risk premiums to normalized levels. Value has been relatively cheap for too long because there has been no reason to trust value for an extended period of time. Stocks like Target (TGT) and Merck (MRK) could do well from demographic sweet spots. U-Haul (UHAL) and home builders could benefit from the urge of 180 million people below 40 years of age to be “free to move about the country” to find affordable places to live. […]

The phrase “majoring in the minor” refers to focusing excessively on trivial details while neglecting more important aspects of a situation. This analytical flaw is especially prevalent in today’s investment environment. Quarterly earnings often overshadow the durability of a business’s long-term competitive advantage, with growth being prioritized over profitability and the scarcity of assets. This shift towards short-term investing has been gradual, but it is more pronounced when we consider the reduction in the average stock holding period by mutual funds, which has dropped from seven years in 1960 to less than a year today. […]

We learned a long time ago that we wanted to know what smart professional investors were doing. It’s always better to know who is smart rather than being smart yourself. Therefore, we’ve constantly kept track of insider buying, what great investors like Warren Buffett and Carlos Slim were doing, and what the most successful hedge funds were up to. A recent chart stopped us in our tracks. […]