Jeff Auxier on the Value of Cumulative Research

Jeff Auxier on the Value of Cumulative Research

Jeff Auxier, Auxier Focus Inv (MUTF:AUXFX)– ‘Value of Cumulative Research (Over Time)’

Jeff is the founder and portfolio manager for Auxier.

Seth Klarman: Investors Can No Longer Rely On Mean Reversion

Volatility"For most of the last century," Seth Klarman noted in his second-quarter letter to Baupost's investors, "a reasonable approach to assessing a company's future prospects was to expect mean reversion." He went on to explain that fluctuations in business performance were largely cyclical, and investors could profit from this buying low and selling high. Also Read More

* Influences:

o Call to Buffett in 1982

o Graham – ‘The Intelligent Investor’, SEC Filings, Annual reports

o Templeton – ‘The Humble Approach’

o Fisher – ‘Conservative Investors Sleep Well’

o Robert Pamplin – Pres. of Georgia Pacific (Jeff’s first job was mowing for him)

* Frame work to endure

o Rational business approach

o Margin of Safety

o Double play (dividends + depressed price) vs. torpedo

* Investing – craft of the specific

o Focus on the important and knowable

o Determining odds of outcomes

o Price dictates capital allocation

o Get away from Wall Street

o Long term focus is invaluable

o Ego & emotion are the enemy (Isaac Newton & South Sea Bubble)

o Compounding most underappreciated concept

* Understand accounting – the language of business

o Importance of ledgers

o lesson from Pamplin – your brain is the calculator

o Ben Franklin – the idea of a ‘moral ledger’ as well

* Misperception of risk

o Buffett quote – risk is not knowing what you are doing….

o Carlos Slim quote – I never take risk

o In 2009, the distressed debt market had 50% loss protection (1930’s worst case was 5%)

o Diversification does not work when there is easy money and assets are inflated

o Research the entire capital structure (could go to 0)

o Adequate compensation for risk taken

o Risk of easy money bubbles

o Avoid hottest companies in hottest industries

o Want inspired management in an uninspired industry

* Crisis is Opportunity

o Since 1947, recessions occur less than 5% of time

o 91′-98′ Small Banks were #1 asset class

* Q&A

o Best ideas now?

* Tesco at less than real estate value

o How many stocks do you hold?

* Normally 20-30

o When should you sell?

* At estimate of full value

o What do you like about Avon?

* Going into emerging markets, where they will have more consumption

Value Investor Conference: Omaha, Nebraska – May 4th, 2012

Dustin Hunter, SunRift Capital Partners (

(These notes are to the best of my recollection.)