Rather than insult the reader, why not turn the question around and ask why do most people UNDER-perform the market? The chart above and below are self-explanatory. People chase what is moving up while ignoring value. It isn’t the asset that you buy but the PRICE you pay for that asset.
I would probably agree that Price-line (PCLN) is a higher quality company with less investment capex than miners, but what price are you willing to pay? I certainly will study PCLN to learn how the stock performed so well. Damn, I missed that one, but can we learn something from PCLN’s business model?
Gold and Silver (CEF) and various index of miners:
2. “I don’t want a lot of good investments; I want a few outstanding ones…. I believe that the greatest long-range investment profits are never obtained by investing in marginal companies.” Warren Buffett once said: “I’m 15% Fisher and 85% Benjamin Graham.” Warren Buffett is much more like Fisher in 2013 than the 15% he once specified, but only he knows how much. It was the influence of Charlie Munger which moved Buffet away from a Benjamin Graham approach and their investment in See’s Candy was an early example in which Berkshire paid up for a “quality” company. Part of the reason this shift happened is that the sorts of companies that Benjamin Graham liked no longer existed the further way the time period was from the depression.
3. “The wise investor can profit if he can think independently of the crowd and reach the rich answer when the majority of financial opinion is leaning the other way. This matter of training oneself not to go with the crowd but to be able to zig when the crowd zags, in my opinion, is one of the most important fundamentals of investment success.” The inevitable math is that you can’t beat the crowd if you are the crowd, especially after fees are deducted.
4. “Usually a very long list of securities is not a sign of the brilliant investor, but of one who is unsure of himself. … Investors have been so oversold on diversification that fear of having too many eggs in one basket has caused them to put far too little into companies they thoroughly know and far too much in others which they know nothing about.” For the “know-something” active investor like Phil Fisher, wide diversification is a form of closet indexing. A “know-something” active investor must focus on a relatively small number of stocks if he or she expects to outperform a market. By contrast, “know-nothing” investors (i.e., muppets) should buy a low fee index fund.
5. “If the job has been correctly done when a common stock is purchased, the time to sell it is almost never.” Phil Fisher preferred a holding period of almost forever (e.g., Fisher bought Motorola in 1955 and held it until 2004). The word “almost” is important since every company is in danger of losing its moat.
6. “Great stocks are extremely hard to find. If they weren’t, then everyone would own them. The record is crystal clear that fortune – producing growth stocks can be found. However, they cannot be found without hard work and they cannot be found every day.” Fisher believed that the “fat pitch” investment opportunity is delivered rarely and only to those investors who are willing to patiently work to find them.
7. “Focus on buying these companies when they are out of favor, that is when, either because of general market conditions or because the financial community at the moment has misconceptions of its true worth, the stock is selling at prices well under what it will be when it’s true merit is better understood.” Like Howard Marks, Fisher believed that (1) business cycles and (2) changes in Mr. Market’s attitude are inevitable. By focusing on the value of individual stocks (rather than just price) the investor can best profit from these inevitable swings.
8. “The successful investor is usually an individual who is inherently interested in business problems.” A stock is a part ownership of a business. If you do not understand the business you do not understand that stock. If you do not understand the business you are investing in you are a speculator, not an investor.
9. “The stock market is filled with individuals who know the price of everything, but the value of nothing.” Price is what you pay and value is what you get. By focusing on value Fisher was able to outperform as an investor even though he did not look for cigar butts.
10. “It is not the profit margins of the past but those of the future that are basically important to the investor.” Too often people believe that the best prediction about the future is that it is an extension of the recent past.
11. “There is a complicating factor that makes the handling of investment mistakes more difficult. This is the ego in each of us. None of us likes to admit to himself that he has been wrong. If we have made a mistake in buying a stock but can sell the stock at a small profit, we have somehow lost any sense of having been foolish. On the other hand, if we sell at a small loss we are quite unhappy about the whole matter. This reaction, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process. More money has probably been lost by investors holding a