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By Investment Master Class

“There is a danger of expecting the results of the future to be predicted from the past.”  John Maynard Keynes

“It is a cruel joke that the most popular asset of each era will impoverish it’s owners?  Every 20 years or so in the twentieth century, the most rewarding investment of the day reached the top of its rise and started a long decline, and the least rewarding investment hit bottom and began a long ascent.  These turning points enriched a small group of nonconformists who caught the turn, but the majority continued to put their money on yesterday’s proven winner.  The majority’s loyalty cost them plenty.”  John Rothchild, The Davis Dynasty

Gates Capital Returns 32.7% Tries To Do “Fewer Things Better”

Gates Capital Management's Excess Cash Flow (ECF) Value Funds have returned 14.5% net over the past 25 years, and in 2021, the fund manager continued to outperform. Due to an "absence of large mistakes" during the year, coupled with an "attractive environment for corporate events," the group's flagship ECF Value Fund, L.P returned 32.7% last Read More

“True, it takes courage to make decisions when only a few clues of change are available.  However, one must constantly try, or else be guilt of what Marshall McLuhan refer’s to as mankind’s tendency to “march into the future looking in the rearview mirror” – a sure way to end up playing the loser’s game.”  Bennett Goodspeed 1978

“The biggest mistake investors make is to believe that what happened in the recent past is likely to persist. They assume that something that was a good investment in the recent past is still a good investment. Typically high past returns simply imply that an asset has become more expensive and is poorer, not better, investment.” Ray Dalio

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"The biggest mistake investors make is looking backward at performance and thinking it’ll recur in the future." John Bogle

"All investors by nature are conditioned by their memories. If they have only been investing for a short period of time and don't have a lot of combat experience, they are particularly vulnerable to what has just happened to them. It is very important not to fall into the attractive trap of extrapolating the most recent past into the future. If you do, it is like steering a sports car up a mountain road, with a steep drop on one side, by peering through the rear-view mirror. " Barton Biggs

“Most people seem to think outstanding performance to date presages outstanding future performance. Actually, it’s more likely that outstanding performance to date has borrowed from the future and thus presages subpar performance from here on out.” Howard Marks

“Anchored in the present, one of the great ironies is that investors imagine the future to be what they see in the rear-view mirror. The windshield is simply too foggy."  Frank Martin

“In the business world, the rear view mirror is always clearer than the windshield.” Warren Buffett

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“The tendency of investors to follow the market’s momentum and bet on whatever has worked recently is accompanied by antipathy to whatever hasn’t. Underperforming market sectors and asset classes are generally experiencing fund outflows, exacerbating the downward trend. Historically, out-of-favour investments have typically performed best in the periods immediately following their underperformance, while those that have done well almost always follow their success by lagging badly” Seth Klarman

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"In the world of investment, failure sows the seeds of future success. The attractively priced, out-of-favour strategy frequently provides much better prospective returns than the highly valued, of-the-moment alternative. The discount applied to unloved assets enhances expected returns, even as the premium assigned to favored assets reduces anticipated results" David Swenson

“Every trendy industry in one decade has a habit of destroying its backers in the next” Chris Davis

“You cannot look at the future by naïve projection of the past” NicholasTaleb

“Customers and capital tend to flow to recently successful mutual managers. But it is just these recently successful managers who, according to voluminous research, are quite likely to be heading for a bad year” Andy Redleaf

"The investor of today does not profit from yesterday's growth." Warren Buffett

“Studies show that what has worked well lately in investing is likely to underperform in the future, while what has lagged is likely to rebound. In the words of the Roman poet Horace, “Many shall be restored that now are fallen and many shall fall that now are in honor”. But such contrarian thinking is always in short supply on Wall Street.” Seth Klarman

“Moving in and out of stocks, funds, investment styles, or asset classes based on what has already gone up or down generally results in unsatisfactory long-term returns” Chris Davis

"it is obvious that the performance of a stock last year or last month is no reason per se, to either own it or to not own it now. It is obvious that an inability to "get even" in a security that has declined is of no importance. It is obvious that the inner warm glow that results from having held a winner last year is of no importance in making a decision as to whether it belongs in an optimum portfolio this year" Warren Buffett

"It has been shown than high performance seems to beget lower returns, and low performance leads to higher returns in nearly all markets from the United States and Canada to Japan and Europe. Today's worst stocks become tomorrow's best stocks, and the darlings of the day turn into tomorrow's spinsters" Christopher Browne

"Overweighting assets that produced strong past performance and underweighting assets that produced weak past performance provides a poor recipe for pleasing prospective results. Strong evidence exists that markets exhibit mean-reverting behaviour, a tendency for good performance to follow bad and bad performance to follow good" David Swenson

“Typically, analysts evaluating the future prospects of a company look at its past. Where else can you look after all? And yet, even if they had a perfect snapshot of the past, they would be mistaken to assume that the conditions that held in the past will hold in the present or future” Leon Levy

"One of the biggest mistakes investors make is to look at the last few years and assume that’s the new norm. If recent years have been volatile and unrewarding, that’s what people generally expect the next few years to be like as well." Francois Rochon

"Computers and their endless databases cause investors to focus on the past. More than ever before, people are looking backward into the future" Shelby Davis

"Beware of past-performance "proofs" in finance; If history books were the key to riches, the Forbes 400 would consist of librarians" Warren Buffet

“You can’t see the future through a rearview mirrorPeter Lynch

"Investors often interpret a stock price rise as confirmation of the underlying company's attractiveness, whereas it really means that the market is reducing your odds of making money and increasing the odds of you losing your money" Francois Sicart

"Projecting market expectations through a rearview mirror is a limiting strategy" Christopher Begg

"It bears repeating that most investors extrapolate past performance, expecting the continuation of trends rather than the far-more-dependable regression to the mean.  First-level thinkers tend to view past price weakness as worriesome, not as a sign that the asset has gotten cheaper"  Howard Marks

Money always chases performance, so it tends to mostly show up after you’ve done really well for a long period of time, probably ten minutes before you’re about to look really silly” Chuck Royce

"Pension fund managers continue to make investment decisions with their eyes firmly fixed on the rear-view window.  This general fight-the-last-war approach has proven costly in the past and will likely prove costly this time around"  Warren Buffett

"I have been around long enough to know that what has worked well in the past rarely continues to do so in the future" Michael Steinhardt

"Buffett concludes that simple extrapolation of the past is the principal instigator of most investment follies"  Frank Martin

“It is important to remember that the consensus is oftentimes wrong – not always wrong, but often enough. Invariably, analysts do not see changes coming – they tend to do what I call “rear-view mirror analysis” by projecting along a straight line from the most recent past and therefore oftentimes miss some big moves.” Jim Tisch

"Ignoring cycles and extrapolating trends is one of the most dangerous things an investor can do"  Howard Marks

"It is dangerous to project past trends into the future. It is akin to steering a car by looking through the rearview mirror (which is OK while the road remains straight, but a catastrophe when the car comes to a curve)." Ed Wachenheim

"Too often, investors are more inclined to look at the rearview mirror than the windshield." Francois Rochon

"One cannot analyse events until they have already happened.  Numbers, the "oxygen" of analysis, lag behind reality.  Analytic methodology is ineffective in identifying change in the early stages and thus contributes to what Marshall McLuhan refers to as man's tendency to walk into the future looking in the rearview mirror"  Bennett Goodspeed

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