Value Investing Quotes: 25 Pages Of The Best

“There are a few books – really not that many – which I believe are indispensable reading for every serious investor in whatever facet of investment practice they may favour:

“Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay (only the first two chapters – the title is worth the price of admission!)
“The Crowd: A Study of the Popular Mind by Gustave Le Bon
“Buffett: The Making of an American Capitalist by Roger Lowenstein
“The Money Masters by John Train
“The Intelligent Investor: A Book of Practical Counsel by Benjamin Graham
“The Templeton Touch by William Proctor
“The Alchemy of Finance by George Soros”

Always Change a Winning Game – “The investment business is organic, based on a mix of financials, politics, human greed, and a huge dose of sentiment – not forgetting the urge to outdo the competition.”

“Sir John Templeton said something to me and it stuck in my mind…Graham also talks about [it]; ‘always change a winning game.’ I didn’t do it because I was on a roll then and I wasn’t flexible enough. There is no investment rule that remains immutable except the margin of safety. There are always breaks and the trick is to begin to anticipate, if you can, where the break points will be and shift. Not the disciplines and not the framework but the tactics that are involved.”

Analysis: “There’s almost too much information now. It boggles most shareholders and a lot of analysts. All I really need is a company’s published report and records; that plus a sharp pencil, a pocket calculator, and patience.”

Dead companies: “The companies I buy, when I buy them, are worth more to me dead than alive. I don’t invest to see them die but I go in knowing that if I keep buying at my price and end up owning the companies, they will be worth more at liquidation than I paid for them.”

“If it is cheap enough, we don’t care what it is.”

“Why will someone sell you a dollar for 50 cents? Because in the short run, people are irrational on both the optimistic and pessimistic side.”

“One of the dangers about net-net investing is that if you buy a net-net that begins to lose money your net-net goes down and your capacity to be able to make a profit becomes less secure. So the trick is not necessarily to predict what the earnings are going to be but to have a clear conviction that the company isn’t going bust and that your margin of safety will remain intact over time.”

Margin of Safety: “The difference between the price we pay for a stock and its liquidation value gives us a margin of safety. This kind of investing is one of the most effective ways of achieving good long term results.”

“What differentiates us from other money managers with a similar style is that we’re comfortable with new lows.”

“When times aren’t good I’m still there. You find bargains among the unpopular things, the things that everybody hates. The key is that you must have patience.”

“When a stock doubles, sell half – then what you have is a free position. Then it becomes more of an art form. When you sell depends on individual circumstances.”

“…it all depends on your entry point and the situation on the day – which is what Graham was really doing – and being flexible. If I had started doing net-net investing in 1973 then I never would have lasted to 1975 in the business. Stocks would have just gotten cheaper and I would have died on the vine and would have had to go back and be a chartered accountant, which would have been a laugh both professionally and for me. Yet Irving Kahn gave me some advice many years ago when I was bemoaning the fact that according to my criteria there was nothing to do. He said, ‘There is always something to do. You just need to look harder, be creative and [be] a little flexible.’”

“We do liquidation analysis and liquidation analysis only.”

“We customarily do three tests: one them asset-based – the NAV, using the company’s balance sheet. The second is the sume of the parts, which I think is probably the most important part that goes into the balance sheet I’m creating. And then a future NAV, which is making a stab (which I’m always suspicious about) at what you think the business might be doing in three years from now.”

James Montier

“As tempting as it may be to be a ‘man of action,’ it often makes more sense to act only at the extremes. But the discipline required to ‘do nothing’ for long periods of time is not often seen.” – James Montier[174]

“Leverage can’t make a bad investment good, but it can make a good investment bad!” – James Montier[175]

“Finance has turned the art of transforming the simple into the complex into an industry. Nowhere (at least outside of academia) is overly complex structure and elegant (but not robust) mathematics so beloved. The reason for this obsession with needless complexity is clear: it is far easier to charge higher fees for things that sound complex.” – James Montier [176]

“In general, critical thinking is an underappreciated asset in the world of investment. As George Santayana observed, ‘Scepticism is the chastity of the intellect, and it is shameful to surrender it too soon or to the first comer: there is nobility in preserving it coolly and proudly.’ Scepticism is one of the key traits that many of the best investors seem to share. They ask themselves, ‘Why should I own this investment?’ This is a different question from the average [investor], who asks, ‘Why shouldn’t I own this investment?’ In effect, investors should consider themselves to be in the rejection game. Investment ideas shouldn’t be accepted automatically, but rather we should seek to pull them apart. In effect, investors would be well-served if they lived by the Royal Society’s motto: Nullius in Verba (for which a loose modern translation would be, ‘Take no one’s word for it.’).” – James Montier[177]

“All too often, so-called financial innovation is revealed to be little more than thinly veiled leverage.” – James Montier

“One of my clients has only one Bloomberg terminal in his office, sitting in the corner, and people get ridiculed when they use it too often. His point is that they don’t need it – their business is investing and they should work out the value before seeing if there is a sufficient margin of safety to invest at the current price. If there isn’t, the work hasn’t been wasted because there one day might be.” – James Montier

“‘What else am I going to do?’ is not the most compelling reason for doing something. If there’s nothing to do, do nothing. It’s not that difficult. Absolute standards of valuation get you away from the idea that you have to be doing something, which goes all the way back to Ben Graham. He was looking at all elements of the capital structure in a very unconstrained fashion, but was fully prepared to hold cash when there were no opportunities.” – James Montier[178]

“I’m amazed at how common the relative valuation argument is. [Speaking about the environment at the time] But you shouldn’t forget that all that argument may be telling you is that bonds suck, not that equities are great. It’s like going to Cinderella’s house and meeting the two ugly stepsisters and being told you should be happy to date one of them. Personally, I’d rather wait for Cinderella.” – James Montier[179]

[On avoiding the temptation to get caught up in the day-to-day turmoil of volatile markets] “Just turning off the screens is usually a good start. It’s the bias of the information age that people feel isolated when they’re not in touch with what’s going on. To me it’s a good discipline to often say, “I don’t really care what goes on in the market today.” When you do that you can actually get something useful done. Even something simple like saying you’ll only answer e-mails in the morning, at lunch and at the end of the day sometimes can go a long way toward avoiding unhelpful distractions that tend to arise. We’re very big on what we call battle plans, in which we map out how we’ll behave at various price points in the market. John Templeton used to talk often

about taking that kind of pre-commitment down to the level of individual securities. Because you’ve already decided what you should be doing, it allows you to focus your attention in a very useful way when the market is falling to pieces.” – James