Value Investing — Six Month Lessons

Now that we are six months into the pod­cast, I thought I (Cameron) should jot down some thoughts about what I’ve learned over that time.

• Val­ue Invest­ing is not pop­u­lar right now. Know­ing near­ly noth­ing about invest­ing when we start­ed, I did­n’t realise that val­ue invest­ing was going through a phase of being looked down upon by many peo­ple. I remem­ber think­ing (and prob­a­bly ask­ing Tony) when we start­ed “why isn’t every­one doing this?” Since then I’ve read a lot about why some peo­ple think val­ue invest­ing is dead and we’ve spo­ken to a num­ber of peo­ple who are get­ting great returns from growth stocks. Per­son­al­ly, though, I’m stick­ing with Tony’s sys­tem. For a cou­ple of rea­sons: 1) Tony’s a lot smarter and wis­er than I am, espe­cial­ly when it comes to invest­ing, and he’s been doing this for a long time. I’m putting my mon­ey on the fact that he still thinks val­ue invest­ing is the smart, long-term play. 2) I’m yet to come across any­one or any sys­tem that helps me under­stand which tech / growth stocks to buy with any­thing approach­ing the same kind of sci­ence Tony’s check­list offers. Maybe Tony will work some­thing out with the exper­i­ment­ing he’s cur­rent­ly doing, but, until then, I’m more inter­est­ed in stick­ing to what has worked for decades. Maybe the com­bi­na­tion of low GDP growth and zero inter­est rates do mean it’s a brand new world, and the shares of good qual­i­ty com­pa­nies are no longer valu­able in the mar­ket. But I’m putting my mon­ey on Tony, War­ren Buf­fett and Char­lie Munger, et al.
• Check­lists are fan­tas­tic. I’m still in awe of how Tony’s check­list make it fair­ly sim­ple for me to take a com­pa­ny’s pub­lic finan­cials and deter­mine whether or not it’s a buy. I hon­est­ly did­n’t know much about how he used it before we start­ed, and as I’ve under­stood it bet­ter, I’m stunned at how clever it is. The more time I spend with it, and the more times Tony explains it to me, the more com­fort­able I’m feel­ing with it. Give me anoth­er year and I think I might know what I’m doing. It’s lead me to start think­ing of oth­er ways to use check­lists. The whole approach of break­ing a com­plex sys­tem down into a num­ber of inde­pen­dent met­rics that can be mea­sured and scored, and then rat­ing the “qual­i­ty” of a par­tic­u­lar the­o­ry based on that score, is some­thing I’ve been famil­iar with for a long time but rarely had the oppor­tu­ni­ty to put into prac­tice like this. It reminds me a lot of Richard Car­ri­er’s approach to using Bayes’ The­o­rem to under­stand his­to­ry, some­thing I’ve been try­ing to under­stand over the last cou­ple of years while work­ing on the doc­u­men­tary. Now I’m look­ing for oth­er ways to use it, like analysing the trust­wor­thi­ness of news sto­ries.

Well that’s all I have for now. I’ve love to hear feed­back from you about how you’re going with the check­list and your thoughts on val­ue invest­ing.

Cameron 2019-10-04