By Investment Master Class

“A key rule in investing is that you don’t necessarily need to understand a lot of different things at any given time, but you need to understand the one thing that really matters” Dan Loeb

“If you are an investment analyst or investment manager, to be successful and to do well, a couple of things have to happen. Number one, in most businesses, the results are driven by three or four factors that control let’s say 80 percent of the outcome and most entrepreneurs are honed in on those three or four factors. They understand those factors and they focus on those factors. If the factors you focus on do not match the factors that the guy running the business is focused on, you’ve not understood the business and there’s a problem over there.” Mohnish Pabrai

“I think ultimately, the ability to distill two or three major themes out of an investment and get right to the heart of the matter – is truly an art” Seth Klarman

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Investing Nuggets
CC Investments Masters Class, used with permission

“Based on my own personal experience – both as an investor in recent years and an expert witness in years past – rarely do more than three or four variables really count. Everything else is noise.” Marty Whitman

“A lot of people will have an hour with the CEO and ask about a lot of industry jargon that could only possibly matter if you knew absolutely all there is to know about everything else in the universe, and these were the last things you didn’t know. But most of the time there’s two or three big things that really matters and it makes sense to focus the research effort there” Daniel Krueger

“Our failure here illustrates the importance of a guideline – stay with simple propositions – that we usually apply in investments as well as operations. If only one variable is key to a decision, and the variable has a 90% chance of going your way, the chance for a successful outcome is obviously 90%. But if ten independent variables need to break favorably for a successful result, and each has a 90% probability of success, the likelihood of having a winner is only 35%. In our zinc venture, we solved most of the problems. But one proved intractable, and that was one too many. Since a chain is no stronger than its weakest link, it makes sense to look for – if you’ll excuse an oxymoron – mono-linked chains.” Warren Buffett

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"In my early years, I ended up too much in the weeds. I had to know everything about a company and its industry. I’ve since learned that knowing less is okay as long as you have identified the one to three things that will drive the company. We believe exactness offers little so we prefer to establish a potential range of outcomes instead. We’d rather be directionally right rather than precisely wrong. " Steven Romick

"To make big money on investments it is unnecessary to get some answer to every investment that might be considered. What is necessary is to get the right answer a large proportion of the very small number of times actual purchases are made”. Phil Fisher

"There are only a few things you have to get right about a company for it to be successful investment. Our view is that if you can get 85% of the way there by answering the big questions, don't waste your time on the last 15% because the marginal utility isn't worth it" Steve Morrow

“It’s very common to drown in the details or be attracted to complexity, but what’s most important to me is to know what three, four or five major characteristics of the business really matter. I see my job primarily as asking the right questions and focusing the analysis in order to make a decision” James Montier

"We've generally found that the really great investments come down to one or two drivers that tell a story differently than people think" Ed Bosek

"One of the difficult things about being a good fundamental investor is that you want to start out with all of the information, but then you want to synthesize it down to just the important factors.  It is always a struggle not to be myopic - you want to make sure that you constantly think about and react to new information.  But you do not want to be chasing your tail.  You want to be focussed on the truly important thingsLarry Robbins

"I believe that there's no need to know every detail, rather there's a need to understand the three, four or five factors affecting the company" Charles De Vaulx

"Our approach stresses the importance of wisdom by subtraction. We endeavour to look past the non-essential details and tune out the often deafening noise. We want to identify the “essence” of each business. So, for instance, what is it about MasterCard that enables them to generate after-tax margins approaching forty percent? Why have the Rales brothers, first with Danaher and second with Colfax, been so successful buying and fixing businesses? How has Markel managed to compound book value per share at fifteen percent for the past twenty years despite falling interest rates and a competitive underwriting environment?."  Chris Cerrone

"If anything, too much information may be available today.  The problem has become less one of digging out information than to separate the irrelevant detail from the essential facts and to determine what those facts mean.  More than ever before what is needed is sound judgement" Bernard Baruch

"There is the qualitative side, which is of course judgemental and has a lot to do with trying to figure out the three, four or five major characteristics of the business.  For instance in the early 1970's, Buffett figured out that the major characteristics of the newspaper business had to do with the fact that many newspapers had a quasi-monopoly" Jean Marie-Eveillard

"Before meeting with top management, I determine the three questions I would ask if I could administer truth serum.  I see a lot of analysts who arrive with five pages of questions, and that’s not very helpful. You want to identify the key questions that are going to drive the investment, and ask the CEO."  Glenn Greenberg

"Investors should remember that their scorecard is not computed using Olympic-diving methods: Degree-of-difficulty doesn’t count. If you are right about a business whole value is largely dependent on a single key factor that is both easy to understand and enduring, the payoff is the same as if you had correctly analyzed an investment alternative characterized by many constantly shifting and complex variables." Warren Buffett

"I focussed my analysis on seeking to identify the factors that were strongly correlated to a stock's price movement as opposed to looking at all the fundamentals.  Frankly, even today, many analysts still don't know what makes their particular stocks go up and down"  Stanley Druckenmiller