Tag: investing framework

What fund managers are saying about the current environment

What fund managers are saying about the current environment

No one knew the market would decline more than 30% in March.

No one knew it would recover all its losses by August.

No one knows what it will do the rest of the year.

— The Motley Fool

The year 2020 has been interesting, to say the least. With the market crashing down at an astonishing speed, and then shooting back up within a short period of time.

New winners and market leaders will emerge from every crisis. For the COVID-19 crisis, tech companies have emerged as the clear winner. Early into the crisis, as CEO of Microsoft, Satya Nadella put it, “We’ve seen two years’ worth of digital transformation in two months.”

While Mr. Market is being lazy and pricing all SaaS companies to the moon, not all of them will be worth the rich valuation. Companies are likely to cut costs and non-essential cloud services are likely to be terminated.

Furthermore, if the pricing model is based on per employee subscription, a surge in unemployment would cause some serious pain for some of the SaaS companies.

Drew Dickson of Albert Bridge Capital describes the current environment best in his latest letter:

People shouted about the “new era” in 1972 and again in 1999; and they are shouting about a new era in 2020.  

There is no new era.  Stocks are still worth the present value of their future cash flows

Alright, enough of my ramblings. Let’s hear what fund managers have to say about the current environment!

P.S. You can access all fund managers letters and learn how to track their buys and sells under Resource.

Nick Train, Lindsell Train

The letter for his UK’s fund can be found here and global fund here.

When Mr. Market is mood swings sharply in both directions and its tough to reasonably estimate business value:

In a market marked by big swings in sentiment and with, understandably, little clarity about the prospects for many businesses we stick to a favoured adage – “when in doubt do nothing.”

While there’s a huge uptick for “virtual” experiences such as e-sports, humans are fundamentally social creatures. Innately, we yearn for “real” experiences:

I have no doubt that human beings both crave & will return to “real” activities & experiences. Clubbing, Disney theme parks, luxury shopping and, yes, attending live football matches will all come again. Because it is human nature.

Fred Liu, Hayden Capital

One of my favorite letters to read, can be found here.

During the second quarter, they generated 93.2% returns for the fund. Compared to S&P 500 returning 20% and the MSCI World returning 18.8%.

They attribute their competitive advantage to their ability to stomach volatility. It is an important trait that differentiates the greats. For investing, legend Peter Lynch says the key organ in your body is your stomach, it’s not your brain.

Stock prices moving up and down is not risk. Buffett explains “Risk comes from the nature of certain kinds of businesses. It can be risky to be in some businesses just by the simple economics of the type of business you’re in, and it comes from not knowing what you’re doing.”

The benefit for our partners though, is that there’s very few investors who are set up to tolerate such volatility – which means that we have sparse competition for our strategy & return profile.

Although the fund has generated outsize returns this quarter, the big money lies in the long-run. The ability to stay invested is just as important as identifying the new winners and future market leaders.

Even though our investments have performed well since that capital call a few weeks ago, I firmly believe the real money is going to be made in the next several years, as consumers take their new habits and the increased online reliance developed during this period, into well after this virus subsides.

There’s going to be multi-bagger returns for the winners, far beyond the mid-teens percentage rebound we’ve seen in the indices these last few weeks

On how they achieved two 10-baggers within 2 years (SEA) and 6 years (Amazon) respectively:

The takeaway is, we need to find companies that 1) are growing quickly, 2) are capturing more value as they grow (as opposed to leaking that value away into their ecosystem), and 3) buy them at an underappreciate multiple which will (hopefully) expand over time as the company proves itself, and thus providing a tailwind to our stock performance.

Not all sales growth are good:

However, the nuance is that the sales growth must come from value-adding activities, either in the form of direct profits, or by strengthening the business’ network effect with each new customer added.

VIG Partners

The letter may be found here.

They discussed their error of selling Spotify based on their concern that churn would increase due to lower usage from less traveling. Lesson here — Never buy or sell based on short-term issues.

Selling a long-term investment holding based on short-term issues is an error that we rarely make, and we will learn from this bitter experience.

Sell only when growth prospects have diminished, not when the share prices have had a run-up.

There have also been occasions when we have forgone substantial gains by selling high-quality companies which are continuing to growth rather than stay the course. We need to avoid the error of “cutting the flowers and watering the weeds.”

If we have extracted substantially all the value from a situation, particularly in a company that has a relatively modest growth outlook, we need to be disciplined about selling.

Characteristics they look for in a business:

An attractive industry structure, pricing power, a resilient revenue stream, high cash-flow generation, a strong balance sheet and the potential to steadily grow earnings.

Jake Rosser, COHO Capital

A copy of his letter may be found here.

The fund delivered a return of 46.6% for the first half of 2020. The most important takeaway on investing from this pandemic:

While the pandemic pulled forward digital demand, the more important takeaway for us is the notion that a good business model provides the ultimate margin of safety.

On evaluating consumer facing technology companies:

One of the most important considerations in consumer facing technology investing is asking whether the product alleviates pain points, reduces friction or enhances convenience. Whether it is Amazon, Netflix or Peloton, all winning consumer platforms exhibit these attributes.

On investing in platform leaders:

Value investors talk a lot about patience, but typically it is about waiting for the market to rerate a company’s multiple after digesting an excisable problem. Better yet is the patience required for a company achieving global scale in a winner take most market – Facebook, Netflix, Google. The economics of these businesses are rarely apparent when in reinvestment mode, but the dominant strains of their business model often are.

Daniel Loeb, Third Point

You may find the letter here.

Third Point was traditionally an “event-driven, value-oriented” fund. Focusing on special situations such as spin-offs, demutulizations, and post-reorg equities.

Side note: To learn more about this strategy, check out Joel Greenblatt’s book: You Can be a Stock Market Genius : Uncover the Secret Hiding Places of Stock Market Profits.

As markets have evolved, selecting high-quality companies on top of the traditional value plays have become essential.

As markets have changed, I have realized that while event‐driven is still an essential investment lens, today, quality is also an essential screen.

This investment environment is characterized by breakneck technological innovation and sluggish growth which has only been amplified by COVID‐19. Considering this, it is essential to find companies with great leadership and unique products in growing end‐markets in which they are gaining share and achieving high topline growth and strong margins.

It is also important not to make the mistake of overpaying for these “compounder” company.

However, when investing in a quality or “compounder” company, it is critical to find an entry point at which an investment is attractive since most of these businesses trade at relatively high multiples.

Peter Rabover, Artko Capital

The letter can be found here.

On the recent market’s dislodge between prices and value. From speculative surge of unprofitable firms such as Hertz and Kodak. To sharp increases in prices due to share splits such as Apple and Tesla, which has no bearings on value.

It is the problem of the definition of “the stock market.” At the heart of it, the stock market is a market where participants exchange fractional ownership of 1000s of companies which are called stocks.

While this may seem like an obvious statement, it is not called “fractional ownership of companies market” and for a lot of market participants the term “stock” becomes something of a cognitive dissonance from what it truly represents and takes on a meaning of its own.

To put another way, the market has participants that are interested in investing in companies underlying the stocks and for them the stock market is a medium through which they can invest in those companies.

The market also has a speculative arm of those that invest in stocks and for whom the underlying company economics matter less, if not at all and the trading behavior of the instruments matter more. These parties are more interested in the patterns of the stock prices and pay close attention to actions of buyers and sellers.

What we are witnessing today is almost a complete domination of the speculative arm of the market, impervious to the deep recession we have found ourselves in, chasing momentum in stocks.

On their strategy with operating leverage (read more about operating leverage here):

While “old school” value investing involves buying companies at cheap price to book values and hope they revert to the mean, our strategy involves buying companies at balance sheet prices and with the expectation that their fundamental results missed by the market will make them valued as growth companies in the long term.

The market has consistently underestimated the operating leverage of companies on the way up and on the way down, which is where we generally like to find most of our ideas, a lesson we learned early on in our career from Michael Moubisan (formerly of Legg Mason) and have reliably witnessed work a substantial number of times over the last two decades.

David Einhorn, Greenlight Capital

As always, Einhorn disses Tesla again in this quarter’s letter. You may read more about it here.

One thing I learn from his continuous spat with Elon Musk is to never short a company with a cult-like following. It can get really expensive even though your points about their accounting and valuation are spot on.

Einhorn shares the same sentiment as Rabover from Artko Capital on the current market euphoria:

We believe the market groupthink that profitless growth stocks that trade at astronomical valuations, in part on the basis that interest rates are low, will be disrupted by rising inflation expectations even in the absence of a corresponding increase in Treasury yields. Other markets like Japan and Europe have long recognized that artificially-controlled long-term interest rates are no justification for stratospheric equity valuations

Ensemble Capital

I have always enjoyed reading Ensemble Capital letters. They are of the view that the recession has ended as economic activities have started to pick up. You may read more about their thesis here.

As investors, we should focus on what matters and what we can control. Anything else is noise that should be ignored.

While we believe that we have a superior ability to do company analysis and select stocks that will outperform the market over the long term, we also know that we do not have any special ability to guess where the market will go in the near term.

This is one of the most frustrating realizations that we think all investors need to come to terms with. If in fact there was a way to systematically predict short-term movements in the market, we would be happy to adopt this approach. But in the absence of this ability, we know that attempts to guess where the market will go next, is one of the surest ways to ruin your long-term investment returns.

They also highlighted why stocks are not highly correlated with the US economy in the short-term.

I wrote about this back in April as well “In performing a discounted cash flow (DCF) analysis, the loss of 12 to 24 months of cash flow due to a complete shutdown would generally reduce a company’s intrinsic value by no more than 5% to 10%.” You may read more about it here.

One mistake we think some investors have made during this unprecedented period, is substituting a forecast of the virus for a forecast about the economy or financial market performance. While clearly the pandemic is a huge negative impact on the economy, they are not the same thing. Stocks are not a direct reflection of the US economy.

The market does not care about the economy today, it cares about corporate cash flows over time.

Today, it seems that the stock market and the economy are totally disconnected. In reality, stock prices are reflecting a view that while the economy is very bad now, it will recover in the years ahead. And in fact, you do not even need to believe the entire US economy will recover to understand the rebound in the market.

Pollen Capital

You may read more about it here.

On focusing on things that matter and capturing the companies that are benefiting from the value migration:

While we do not make macro-economic predictions or claim to know how markets will perform in the coming quarters, we continue to have conviction in the strength and durability of the businesses we own and believe that most, if not all of them, will emerge from this period stronger.

The secular tailwinds that many of our companies enjoy also appear to be strengthening as a result of spread mitigation policies globally… The companies benefitting from these shifts have the largest weightings within our Portfolio.

Robert Vinall, RV Capital

This whole letter is worth a read as he covers on his new investments such as Tencent and offers good insights to analyzing businesses at its early stage. You may read more here.

Robert gave a honest review of his feelings during the crash, which is something most of us have to battle with during a sharp drawdown:

I would rate my own performance during the panic as, at best, average. I was tentative when I should have been bold. I preferred to add to existing holdings rather than make new investments. I held back some cash when I should have been all-in (whereby in my defence, I wanted to have cash available to be able to support our companies though ultimately it was not needed).

He also argues why investors shouldn’t only look at digital-first companies due to tail-end risk. Just as nobody expected a pandemic to take down the economy, it is hard to imagine a computer virus that would take down these companies.

In fact, in January I wrote that the greatest longtail risk to the economy was from a virus… of the computer variety (so near to glory, and yet so far). I still believe a computer virus is a major risk and strongly recommend reading “Sandworm” by Andy Greenberg to get up-to-speed on how fragile the Internet is.

The big lesson from this crisis, or any crisis, is that the unexpected sometimes happens. The correct investment strategy is not to try to predict the unpredictable (which is futile), nor is it to just own Internet companies (which is simplistic). It is to own companies that have sufficient reserves of strength to weather any crisis.

Bill Miller, Miller Value Partners

You may read the letter here.

On the disconnect between economic reality and stock prices:

The biggest problem with those who believe the market is disconnected with economic reality because the economic numbers still to come will be dreadful (and they will be) is that those numbers report the past and the market looks forward. The market predicts the economy; the economy does not predict the market.

My final thoughts

A few of my friends have talked to me about stock splits. Given Apple’s and Tesla’s recent stock splits and its impact to intrinsic value.

TL;DR — There’s no impact on intrinsic value. Don’t invest because of the hype surrounding it.

Image

The best way to explain stock splits is using pizzas. Cutting a 12 inch pizza into 8 slices or 40 slices doesn’t change the size of the pizza.

It is still a 12 inch pizza.


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Focus on total returns, not income investing

Focus on total returns, not income investing

This is a sequel to Getting Hurt Chasing Yields – Part 1. Apart from investing in instruments and companies that are unable to sustainably pay out interest and dividends based on their operating cash flow, investors are committing a mistake by solely focusing on investing for income.

Income investing means building a portfolio of interest or dividend-paying common stocks, preferred stocks, and bonds in an effort to generate sufficient income to maintain their desired lifestyle.

Investors should not be fixated on chasing yields. Rather, they should focus on the maximum total return they can derive from their investments. Total return includes both income and capital gains.

“The best way to approach this is to invest for the highest total return you can achieve and sell whatever shares or units you need to provide cash. However, I realise that for many investors, the idea of realising part of their capital to provide income is anathema.”

Terry Smith, CEO of Fundsmith

When investors focus on income-producing stocks, most are focused on stocks that have a high dividend yield. Generally, this would be limited to companies that pay out most of its earnings as dividends such as REITs or mature companies such as Singtel and Comfortdelgro.

These companies do not retain most of their earnings for reinvestment. Largely because they are unable to reinvest at high returns. Cash generated by the business will have to be deployed at other places (e.g. acquisitions) or returned to owners (e.g. via dividends or share buybacks).

Investors focusing on dividend yield alone would miss out on the great compounders – companies that are able to reinvest at a high rate of returns. Instead of paying out a dividend, they would retain most of their earnings for reinvestment. Growing the intrinsic value of their businesses.

Let’s look at an example comparing two businesses and understand which yield a higher total return. The first company, Compounding Corporation. It has the ability to reinvest all of its retained earnings at high returns due to its strong reinvestment moat. As a company that grows at a high ROIC, the market assigns it a higher multiple, at 20x earnings.

The second company, Dividend Corporation. It is a mature and steady business that pays out good dividend yield and trades at 10x earnings.

Assume that, over time, both companies will be valued approximately in line with the market, at 15x earnings. In this case, Compounding Corporation will suffer a multiple derating, while Dividend Corporation will enjoy a multiple expansion.

Let’s observe which company would provide shareholders with higher total returns:

By focusing on companies that provide a high dividend yield, investors would miss out on companies like Compounding Corporation. Although income investing would provide a decent result. The opportunity cost of doing so is huge (total returns of ~700% against ~300%).

The desperate search for yield has led to a number of people choosing to invest in income funds, or in mature companies providing a high dividend yield. On the surface, it might sound sensible, but it is erroneous. It may lead to investors underestimating the risk of investing in high yield instruments. Moreover, what is less obvious is the opportunity cost of focusing on yield only, as opposed to the total returns of a company that is able to compound at a high clip.

You can also follow my Facebook page for updates here!

Lessons learnt investing through market crashes

Lessons learnt investing through market crashes

“Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”

– Sir John Templeton

For the past two months, since Feb 2020, the S&P has been trading like a penny stock, making extremely volatile movements of more than 5% on many trading days. It took only 6 days for it to reach correction (a decline of 10%) and 16 days to become a bear market (a decline of 20%). It was one of the fastest drawdowns in the market ever since.

The upswing was as intense as the downswing, with the market rebounding 28.5% since its bottom on 23 Mar 2020.

In fact, you can argue that if you’re not willing to react with equanimity to a market price decline of 50% two or three times a century you’re not fit to be a common shareholder, and you deserve the mediocre result you’re going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations.

– Charlie T. Munger

A look at previous crises

Historically, we experience a 10% market drop every 2 years. Since the 1950s, stocks have fallen 20% or more only 11 times (about once every 6 years). Including now, a decline of 30% or more has only happened 6 times; an opportunity that happens once every 12 years.

“The time to buy is when there’s blood in the streets.”

Investors should always expect the market to move up, down or sideways. We should not be surprised when the market has a sharp drawdown. However, when something this drastic happens, it will freeze most investors. Some of the most common statements I hear amidst this Covid-19 induced downturn include:

  • I may be catching a falling knife
  • Unemployment claims have never been so high before, there is too much uncertainty
  • Globally, the number of infected cases is still rising exponentially and we don’t see anyone travelling or dining out soon

These are all legitimate concerns, but in investing you either get a cheap valuation or a rosy outlook; you will never have both at the same time. You pay a very high price in the market for a cheery consensus. The important question investors should be concerned about is,

“Which companies will survive and do even better coming out from this crisis?”

Someone once said that the best time to buy is when your stomach starts to churn. And it is important for us to prepare a watchlist of high-quality companies so that we may take advantage of the downturn. As Howard Marks put it best in his recent memo: “The most important thing is to be ready to and take advantage of declines.”

The market has emerged higher from every crisis

Covid-19 is going to leave a mark, but it is going to come and go. If history is a good indicator, the stock market will increase over time as corporate profits rise. Despite ‘unthinkable’ disasters happening, America’s markets have displayed their resilience and it would be unlikely that Covid-19 will destroy their economic engine permanently.

As the saying goes, this too shall pass.

On average, US corporate profits rise 8% annually. But bear in mind that companies do not increase profits on a straight-line. There will be down years and up years, and what’s most important that we understand our companies to have the conviction to hold through downtimes.

Equally important is that we must not invest in cash that we need within the next 5 to 10 years and we must not invest our emergency savings. The market sometimes can stay irrational longer than you can stay solvent.

What do I do during a crisis?

I buy.

More specifically, I buy companies on my watch-list in tranches. There is no rule to this and I deploy my available funds based on probability of these events happening:

  • 20% market decline: Likelihood of occurrence is 15%, I will deploy 50% of my available funds at this stage
  • 30% market decline: Likelihood of occurrence is 8%, I will deploy 30% of my remaining funds at this stage
  • >40% market decline: It has only happened 3 times since 1950, I will be fully invested by this point.

Apart from deploying my available cash, I would also be selling lower-quality stocks in my portfolio and buying high-quality companies as the market throws them out. High-quality growth companies and cheap/ reasonable valuations seldom come hand-in-hand. And when the market gives the opportunity to be an owner of these companies, pounce on them!

As you sell your companies to buy high-quality companies in a downturn, it will inevitably be painful as you will likely have sold it at a discount. In moments like these, it is helpful to remember Warren Buffett’s saying:

I’d committed the worst sin, which is that you get behind and you think you’ve got to break even that day. The first rule is that nobody goes home after the first race, and the second rule is that you don’t have to make it back the way you lost it. – Warren E. Buffett

To sum it up, markets will go up in the long run and during a crash, there will be a lot of commentators predicting what will happen next. The most important thing is to have a watch-list beforehand and follow your game plan as the market provides you with opportunities to own great companies. Never invest in cash you would need in the next 5 to 10 years, you must stay in the game for this to work.

You can also follow my Facebook page for updates here!

My Investing Framework

My Investing Framework

I started my investing journey around 14 years ago, after reading Rich Dad, Poor Dad. The idea of acquiring income-producing assets resonated and I have since started consuming books after books and resources on the web regarding investing. Today, I focus mainly on growing companies with a wide moat and great management in place.

Looking back on my investing journey, I first started out using a mix of fundamental and technical analysis. I was thrilled when I saw gains of 30% to 50% within a short time frame of 6 to 12 months. It got me to dive deeper into the subject and I subsequently learned about deep value investing, buying companies so cheap, that I could make 30% to 50% if the company was liquidated.

However, those were one-off returns and I was lucky that some of my early investments turned out okay.

Technical analysis paints a nice story as to why the share price moved up, down or consolidate (sideways). It is impossible to be consistently right on the patterns and I find myself questioning “What does historical price movement has got to do with the future and is it reflective of business fundamentals?”

Deep value investing, otherwise also known as cigar-butt style investing is as its name sounds, it gives you one last puff. Once the stock revalues upwards, it will be sold off and we will have to hunt for the next idea. Deep value stocks are often cheap for a very good reason. Usually, they are either facing structural decline or they are in a cyclical industry. Both of which could be adverse to your wallet. And nobody knows when the stock will revalue, waiting for the stock revaluation is like watching the paint dry.

In order for me to build up wealth, I switch my approach to looking for companies with a wide moat and can continuously reinvest its earnings at a high clip. The book 100 Baggers by Chris Mayer illustrate this approach the best, quality companies that have a long runway are able to continuously reinvest for growth.

This brings me to the 2 basic rules of compounding:

  1. The longer you let it work, the bigger its impact – time, not rate of return, is the most important factor in the compounding formula
  2. If you lose big money even a few times in your compounding journey, you will not receive its benefits, even in the long run (Google Long-Term Capital Management for example.)

“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.”

Warren Buffett

With that in mind, the following are the list of filters I learnt and apply over the years to steadily compound my wealth:

1. Do I understand the business?

Value investing require us to be able to reasonably assess the intrinsic value of a company. Companies with complicated business models or accounts would go straight into the “too hard” pile. As Warren Buffett puts it “I don’t look to jump over 7-foot bars: I look around for 1-foot bars I can step over.”

There are plenty of companies with a simple business model which has generated above-market returns over the years. Names like Starbucks, Google and Monster Beverage should be familiar to many and easily understood.

2. Does the company have a wide moat?

Moats are what protects the company’s profits from its competitors and wide moats enable a company to generate a high return on capital. A company’s moat is either widening or narrowing. Here I am looking for companies who are continuously investing to widen the moat and focus on the long term outlook of the company.

Companies such as Amazon and Monster beverage have delivered >100x returns for their shareholders as they were willing to sacrifice short-term results and focus on widening their moat.

3. Is the company able to reinvest at high returns?

I prefer companies that do not issue dividends and is able to sustainably reinvest its earnings at above 15% returns. For compounding to work its magic, the company should have a long runway for growth. I look for companies whose revenue are small relative to the potential market.

For example, Facebook currently captures approximately 20% of the global digital advertising market and the digital market is expected to grow 12% per annum over the next 5 years.

4. Does the company generate high Free Cash Flow?

Not all earnings are created equal. Charlie Munger once joked about his friend John Anderson’s construction equipment business at Berkshire’s AGM. The company makes 12% return on capital yearly, shows a profit every year but there is never any cash. The profits are all the metals sitting in the yard. In order to keep going, the cash is constantly ploughed back into the business and there’s neither growth nor cash for the shareholders.

I look for companies that are able to generate high Return on Tangible Assets (ROTA) of at least 20%. A company that shows high ROTA is able to bring in income with relatively little assets.

In Warren Buffet’s 2019 shareholder letter, he highlighted that the companies Berkshire owns typically earn more than 20% on the net tangible equity required to run their businesses without employing excessive levels of debt.

5. Competent and Shareholder Friendly Management

“Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy.”

Warren Buffett

Here I am looking for management who are great capital allocators, open communicators and preferably with significant skin in the game. Judging management is really more of an art than science, here are some key indicators I look out for:

  • Ownership – Do the executives & directors have a stake? For this I look at the portion of net worth the management has that is tied up to the company’s stock. The classic example is Warren Buffett with more than 90% of his net worth in Berkshire Hathaway!
  • Insider Trading – As Peter Lynch says, insider buys only if they feel that the stock price is going to increase!
  • Remuneration – Is there an agency problem? Is management excessively remunerated compared to net income of the company and is it exorbitant compared to competitors? I will also look at their remuneration structure, are they compensated for long-term capital allocation skills or short term results (e.g. next year’s EPS growth)?
  • Capital Allocation – Based on their past records, have they generated at least a dollar for every dollar retained in the business?
  • Related Party Transactions – Red flag that warrants further investigation if its a significant percentage.
  • Shareholder Letters – Are they frank in their annual letter to shareholders, highlighting both success and failures. I regard Warren Buffett from Berkshire and Ronnie Chan from Hang Lung as the gold standard in this area.

As minority shareholders, we are passive in deciding how a company is managed and run. Here, we must select competent management with a demonstrated interest for shareholders to generate positive returns for us as shareholders.

While not perfect, this investment framework has helped me pick up high quality companies over the year that would compound my wealth steadily. As Peter Lynch says “In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”

P.S. Below is an advert on Wall Street Journal posted by Warren Buffett back in 1986 which outlines his filter for investments. Enjoy!