Category: Missives

When you grow up with a father who worked in the brokerage business, you hear a lot of stories. The especially interesting ones are those about the investment business in the 1980s. Many times, my dad, Bill, has told me about Jack McCarthy, who ran the Affiliated Fund at Lord Abbett & Co. in the 1980s. At that time, the podcast of the era was sending a recorded tape of your thoughts to get the word out to investors. In 1984, Jack’s wisdom and recommendation were timely. […]

Investors who have come to us in the last three to four years are probably wondering if we’ve been here before. By here, we mean a stretch of significant underperformance relative to our benchmarks. The answer is, yes. Let’s review those prior circumstances to see if we can learn something about where we might be headed. […]

[…] This is truly a Noah stock market. Everything we have studied about common stocks, including “The Intelligent Investor” by Ben Graham, “A Short History of Financial Euphoria” by John Kenneth Galbraith, and from listening to the wise words of Charlie Munger and Warren Buffett for decades leads us to believe that we must build a common stock portfolio which will float when the multi-year bear market creates a waterfall of selling among magnificent growth stocks and passive S&P 500 Index owners. […]

[…]. The great Vanguard Windsor manager John Neff used to say, “When you want to brag about a stock, you ought to sell it.” What has been happening lately in our interactions with our current and potential investors all around the world is startling. Asset allocators are repeatedly telling us that if they sell any of their core position in the S&P 500 Index, they would get fired by their customers. In other words, the S&P 500 Index is “on top of the world!” […]

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. […]

All portfolio managers practice a stock-picking discipline in which they make choices. Growth stock investors attempt to predict which companies will grow the most in the future and compare the growth they expect to what they have to pay to participate. Value managers try to buy companies that are available at a discount to the average stock in hopes of getting average to above-average company performance. We know people we admire in both camps and like to think about how an investor might try to draw from both investment styles. […]

The Federal Trade Commission (FTC) recently blocked the merger of Albertson’s and Kroger, which are the two largest stand-alone grocery chains. Their theory is that the merger would be anti-competitive and cause higher grocery prices. We find this to be another epic failure on their part to understand the purpose of the Sherman Antitrust Act as overseen by the Justice Department and the Federal Trade Commission. […]

Yogi Berra was a beloved, successful baseball athlete, manager, and cultural celebrity. An entire book was written about his verbal amorphisms. One of my favorites was when he said, “It’s déjà vu all over again!” For us as investors, we can say that this is déjà vu all over again as we practice our stock picking discipline. […]

How does the euphoria for stocks in the days after the 1980 election contrast with today’s Trump election euphoria? What were the fundamentals of the 1980 stock market compared to today’s fundamentals? What interest rates were paid to borrowers of money? We will make the case for very useful contrarianism in the aftermath of the current stock market euphoria. […]

Dow Jones (publisher of “The Wall Street Journal”) announced that Nvidia (NVDA) will replace Intel (INTC) in the Dow Jones Industrial Average. Intel was brought in to replace Union Carbide four months and nine days before the peak in Intel’s stock price. Union Carbide became Dow Chemical via merger. The shares of Intel are down markedly over nearly 25 years in price and provided a total return of 3.2%. Dow and its components gave a 326% total return over those same years. […]