Berkshire 2011 meeting notes ? why and how to invest for inflation


No I unfortunately did not attend the 2011 Berkshire Hathaway yearly meeting but a good friend did.

Even thought have read quite a few reports on the meeting this one is a good summary catching the main points.

What I found really interesting was Buffett's thoughts on investing for inflation and my friends ideas on what will be good investments.

Invested in emerging markets because of high economic growth? There is a better way?


Are you invested in emerging markets or is considering it because of the weak economic growth in Europe and the USA?

If so this article will give you pointers on how to maximise your gains.

I am sure you have seen and heard the argument that you should invest in emerging markets because the higher economic growth will equal higher stock market returns.

It's an interesting idea and it makes for a nice story but does the argument hold?

I can just say from past research I have seen the relationship may not be that strong.


Here is some good research I have found.

A fund manager I would recommend to my parents


If there was one fund manager I would recommend to my parents and sister it would be the one I am writing to you about today.

He came into fund management in a very unusual way.

He ended his formal education at Grade 12 in India and immigrated to Canada in 1976. In 1981, while working as a technician for a phone company, he started an investment club with C$51 000 that would later become one of the funds he still manages today.

For the last 20 years he has operated two of Canada's most successful investment funds. So successful that in 2004 he was named Morningstar's fund manager of the decade.


How patience can increase your returns


Do you look at your total trading cost at the end of each year?

I make a point of looking at my total expenses each year at the same time as I review my past years activities and calculate my returns.

Each year I was astounded at the amount I spent just on buying and selling securities in spite of me paying on average only 0,30% per transaction.

About two years ago I took a conscious decision to trade less as I realised that trading cost me at least 0,5% of performance each year and that a lot of investments increased in price, sometimes substantially so, after I had sold them.

My idea that less transactions would equal better performance was confirmed after I read the September 2008 article by James Montier called Going global: Value investing without boundaries


Ever heard of the flow ratio?


If you've been investing for a reasonable amount of time sure you've realised how important it is to analyse the working capital management of the company.

If like me you are always looking for shortcuts to evaluate companies this article may be especially useful to you.

It is a shortcut that I've come across that helps you evaluate the working capital investment of a company quickly and very effectively


My biggest investment loss ever ? Tell all interview


What was your largest investment loss ever?

I am sure you can remember it exactly. The company, what year, the amount and percentage lost.

Now try this?

What was your most successful investment ever. In terms of amount and percentage gain.

I am sure it's a lot harder to come up with the exact details.

For the life of me I could not, I had to look it up.


Here’s a quick way to improve the results of Joel Greenblatt’s Magic Formula


Long time readers know I am a big fan of the Magic Formula investment strategy developed by Joel Greenblatt in his excellent book The Little Book that Still Beats the Market. (Click picture for Amazon page)

As you may know the Magic Formula strategy is a pure strategy based on numbers.

This means that there are also a lot of junk companies that come up when you use the formula.

Companies with large once-off profits, high historical profits that may not be repeated due to a contract loss. You know what I mean.

I always thought that the already excellent returns of the strategy can be further improved by removing the companies the Magic Formula should not be selecting.

Doing this however takes a lot of time.

You have to look at the financial statements of the company and read annual as well as quarterly reports. Not just for one year but for the last few years to find out exactly what is going on in the business.

Because all of us are pressed for time I was really glad when I found someone that does exactly that.

Meet Alan McConnochie


As you know I am always on the look out for investors that know what they are talking about and with successful long term track records to back it up.

During my recent holiday in South Africa I met with a person with lifelong investment experience. Just to give you an idea I subscribed to his investment newsletter Pennywise shortly after I started investing in 1988.

Alan and I had a long and interesting conversation.

After saying goodbye I immediately thought Alan was someone I want to introduce you to, especially if you follow or are interested in the South African markets.


Your investment success: Skill vs. Luck


Has your investment success so far has been based on luck?


If it is you are unlikely to be successful over the long term as at some point your luck will run out, most likely when the bull market ends.

But how do you know if you have been lucky or if your investment success is based on skill?

It's easy to confuse the two. And I am sure you have never met an investor that has said his success is only based on luck.

So how do you determine if you are a skilled investor?

Knowing the difference is especially important if you invest in funds. You want to determine, preferably before you invest, if your fund manager's track record is based on luck or if she is really a skilled investor.

I have read and thought about how to tell skill and luck apart a lot.

Not because I wanted to apply it on someone else. I wanted to know if I have so far just been lucky or if I have some skill as an investor. For if I have just been lucky I want to give my money to someone skilful as soon as possible before I lose everything.

The best writing on the subject I could find is an article by someone I admire and have followed since at least 2004.

Go to Top