Bryan Lawrence ('BL') is a concentrated value investor - generally holding 10-15 stocks. We prefer a more diversified approach giving play to the law of large numbers when the odds favor each stock - however, we enjoy learning from investors with approaches different from our own.
Notes on his talk at a Grant's investment conference below:
4:30 52-week range
The average stock price goes up and down by 80% in a year - nothing has changed since Ben Graham's time regarding the pathological nature of stock speculation i.e. to give way to greed and fear.
The opportunity set for investors remains undiminished.
We'd argue that by casting your net across the world, you can find more bargains and better bargains than just the US (though geopolitical risks should be considered) - which we present in our reports.
9:45 CGM Focus Fund
The CGM focus fund was the best performing fund from 2000-2010 (+18%/year) but the average investor in the fund lost money by jumping in and out of the fund as performance fluctuated. The $-weighted return of the fund was -11%/year.
Even if you're on a good train, your temperament can undo you. It's essential to stick with an approach that makes sense to you, and you're comfortable with.
12:45 Shelby Davis
Another reference to Shelby Davis' investing acumen - Davis seems to have taken an interesting approach focusing on insurance stocks. But he held a more diversified portfolio, and held his big winners (AIG) - an approach we favor.
14:15 Durability of cashflows
BL focuses on the durability/predictability of cashflows, which entails an understanding of business economics i.e. demand prospects, competitive strengths, etc.
BL talks about underperforming the S&P 500 for seven of the last 17 years. Such underperformance is likely to be more pronounced in concentrated portfolios - requiring greater depth of conviction.
The level of portfolio concentration is for each investor to decide based on his knowledge, experience, and temperament.
Remember, it's consistency over a long period of time that matters most in an investing lifetime.
25:30 Investigative journalism
The ideal approach to stock research is the attitude of the investigative journalist.
Our inspiration for report format was the Lex column of the Financial Times newspaper. Though we don't try to match its wit, we present actionable ideas by packing the most important considerations in brief Lex-length reports.
28:45 Fund size
The smaller you are, the more opportunities you have among smaller stocks.
Here, BL talks about his investments at 10x earnings - since we're smaller, we can generally find more opportunities on better terms, which we report on.