Smart Investing Owners Manual - Smart Investing with Brian Golly
Contents
1. The making of an American Capitalist Roger Lowenstein There s Always Something to Do The Peter Cundill Investment Approach Christopher Risso Gill2. Smart Investing Owners Manual Prepared by Brian R Golly DFS Investments Inc Suite 230 2300 Dewdney Avenue Regina Saskatchewan S4R 1H5 www smartinvestingsask ca History shows us that the most successful investors are not the ones who take the largest risks The most successful investors are the ones who work extremely hard to minimize the risks Warren Buffett Desjardins Financial Security investments Inc Thank you for taking the time to read the Smart Investing Owners Manual The purpose of this document to provide you with a reference source to heip better and more fully understand 1 The common personality traits need to see in the people money mangers who will be making investment buy sell decisions with your money 2 The investment process and philosophy that require our money managers strictly adhere to have learned over my years in this business that good solid investment decisions are never born not out of random luck Successful investment decisions are a product of intelligent and thorough data gathering careful due diligence and logical decision making The only way to truly determine if you are buying something at a bargain price or put another way to ensure that you are receiving good value in return for your purchase price is to first completely understand exactly what you are buying This value for money principle works when purchasing all kinds of assets such as a
3. behalf of my clients gt Integrity If you stand for nothing you will fall for everything that comes along Many people look for shortcuts and they will go to great lengths in order to try and find them In the investment world there simply are no shortcuts All we have are the basic fundamental principals that have been proven to deliver value to investors over time decided very early in my career to build my practice by exclusively working with money managers who 1 believe in the same value investing principals that Warren Buffett follows and 2 possess the integrity to stick to them gt Experience The more experience someone has in a particular field the better quality decisions they tend to make It is for this simple reason that have built my practice by working with money mangers who possess a minimum of 15 years of investment experience Money Mangers with a wealth of experience tend to make far fewer mistakes and this as served clients well over the years gt Intelligence In order to make a quality investment either buying or selling decision an investor must first fully understand a business in order to properly estimate the actual worth of the company Businesses today are larger and more complex that ever before making understanding them a more difficult task need to see that a money manger is taking all of the appropriate and necessary steps to fully understand the b
4. e Munger open the floor to questions Those Q amp A sessions last approximately six hours on average and are quite similar to sitting in on a university class on investment wisdom philosophy and process have taken the template that Mr Buffett has developed and laid out for us and used that Knowledge as a measuring stick when choosing money mangers to work for my clients The following is a brief description of Warren Buffett s investment process as described in the book The Warren Buffett Way by Robert Hagstrom Warren Buffett s investment criteria for choosing companies to invest in Business Criteria 1 Is the business simple and understandable 2 Does the business have a consistent operating history 3 Does the business have favorable long term prospects Management Criteria 1 Is the company s management rational 2 Is the company s management candid honest with their shareholders 3 Does management resist the institutional imperative Do management decisions reflect emphasis on maximizing shareholder owner value or do their decisions reflect enriching members of management Financial Criteria 1 What is the return on equity operating earnings net shareholder investment 2 What are the company s owner s earnings revenues expenses 3 What are the profit margins owner earnings revenues X 100 Value Criteria 1 What is the current value of the company 2 Can it be purchas
5. ed at a significant discount to its value bargain smart Investing goals for each client Although every client work with has a unique set of circumstances which require a specific and individualized set of solutions the following are the three overall general goals that am working to accomplish with each and every client that chooses to work with me v Minimize investment risks v Avoid investment mistakes v Achieve above average investment returns over time Ongoing Investment Management Process My experience and research has shown me that successful long term investing requires a combination of both appropriate asset diversification and sound money management investment decision making In order to remind yourself of the appropriate asset diversification we arrived at for your particular set of circumstances please review your personal Investment Policy Statement Sound money management is a combination of both sound due diligence data gathering and interpretation Process and the emotional and personality traits required People to allow the investment decision making to be driven and dictated by substantial and tangible facts i e valuations not uninformed speculation and baseless predictions based on emotional responses to movements in the stock markets The following is a description of the Process need to see in a money manger s investment philosophy prior to allowing the manger to
6. h provided him with the ability to consistently make solid investment decisions Mr Buffett has taken these principals and used it to grow his holding company Berkshire Hathaway Berkshire into a Fortune 900 company Berkshire owns a large number of well respected businesses such as GEICO Dairy Queen Fruit of the Loom Net Jets Shaw Industries Benjamin Moore Paint Borshiems and many more along with being large shareholders in companies like Coca Cola American Express Procter amp Gamble and Wells Fargo among others When I came to understand how Warren Buffett was able to build his wealth without the benefit of insider information or tricks determined that the best and the most honorable way to succeed in this business was to duplicate to the best of my ability Warren Buffett s investment process for my clients have come to this understanding by not only reading everything ever written about Mr Buffett that could get my hands on but by closely following him in the news Each year Mr Buffett writes a letter to his shareholders which can be downloaded from www berkshirehathaway com in which he shares his investment opinions and explains his thinking He also makes frequent appearances on television business shows like Fox Business News CNN and CNBC To date have attended Mr Buffett s annual shareholders meeting in Omaha five separate times During these shareholders meetings Mr Buffett and his partner Charli
7. l yields between 2 8 amp 17 4 But surprise none of these events made the slightest dent in Ben Graham s investment principles Nor did they render unsound the negotiated purchases of fine businesses at sensible prices Imagine the cost to us then if we had let fear of the unknown cause us to defer or alter the deployment of our investment capital Indeed we have usually made our best purchases when apprehensions about some macro event were at a peak Fear is the enemy of the faddist but a friend to the fundamentalist A different set of major shocks is sure to occur in the next 30 years We neither try to predict these nor profit from them If we can identify businesses similar to those we have purchased in the past external surprises will have little effect on our long term results Excerpt from Warren Buffet s letter to Berkshire Hathaway shareholders March 1994 first realized that could make a career out of this business when found out who Warren Buffett was Mr Warren Buffett was born in Omaha Nebraska He came from a childhood of limited means to become one of the world s wealthiest people personal net worth 40 Billion Dollars U S What s remarkable about Mr Buffett s story is that he did not achieve his wealth via an inheritance or winning the lottery He gained his wealth by investing in businesses from a very early age and while doing so developed simple and logical investment principals whic
8. s to dictate their investment decisions Sniper approach as opposed to the shot gun approach This is a character trait that is next to impossible to teach but vital to long term investment success gt They love what they do Another character trait that unfortunately can t be taught love to work with money mangers who enjoy the process of uncovering the next quality investment opportunity and the intense analysis curiosity and hard work it requires to do execute the process well on a consistent basis Money Managers will NOT work with simply refuse to recommend to clients or work with money mangers who gt Vv Y WV WV spend a significant amount of time attempting to predict future stock market fluctuations have been managing money for less than 20 years are limited where they can invest either by market cap size of business or sector type of business on average hold more than 75 holdings prefer a maximum of 50 have a history of allowing their emotions to dictate their investment decisions possess excessively high turn over rates in their funds possess excessively short holding periods in their funds do not possess a disciplined Sell strategy display a history of guessing Recommended Reading List The Warren Buffett Way Robert G Hagstrom Damn Right Behind the scenes with Berkshire Hathaway billionaire Charlie Munger Janet Lowe Buffett
9. usinesses they are making investment decisions on believe that anything short of this is purely speculation gt Dedication It is more important in the long run for money mangers to stick to what they know is right even if it is not the most popular decision at the time This is one of the lessons we learned from the technology bubble in 1999 It would have been very easy for money mangers who believe in owning quality profitable businesses to compromise their beliefs as the popular trade at that point in time was to buy into frenzied speculation no product no revenue no profit just a future idea Money Mangers who stuck to their principals although enduring some short term pain were rewarded in the long term as they were able to invest in quality profitable businesses at bargain prices and deliver those profits to their investors in the years that followed gt Patience work with money mangers who hold out for both the right business and the right price There are lots of quality well managed and profitable businesses available today Not all of them trade at levels that represent good odds of significant capital gain appreciations over time work with money mangers who have shown they possess the patience to wait for the appropriate price level before committing my client s money to an investment decision gt Can keep their emotions in check work with managers who don t allow their emotion
10. utomobiles real estate livestock and items at garage sales Frankly this same principle works equally as well when choosing equity businesses or fixed income debt investments By carefully ensuring that the money managers we choose to work with possess 1 a sound investment philosophy and process and 2 the necessary emotional and personally traits required believe that will have put my clients on the path to enjoy the fruits of minimized investment risk reduced volatility and solid investment returns for as long as they choose to work with me sincerely hope this document helps you better understand the investment philosophy employ with my clients As always please contact me to ask any questions you may have Sincerely Brian Golly investment Funds Advisor Office Address Branch Office Suite 230 2300 Dewdney Avenue Suite 217 3501 8 St E Regina Saskatchewan S4R 1H5 Saskatoon Saskatchewan S7H OW5 Office 306 546 2533 Office 306 956 3344 Fax 306 205 7192 Fax 306 956 3143 Email brian smartinvestingsask ca Website www smartinvestingsask ca It all started when discovered who Warren Buffett was Thirty years ago no one could have foreseen the huge expansion of the Vietnam War wage and price controls two oil shocks the resignation of a president of the United States the dissolution of the Soviet Union the fall of the Berlin Wall a one day drop on the Dow of over 508 points or treasury bil
11. work on the behalf of my clients Investment Process gt Think of investing as the purchasing of actual businesses not the trading of stocks gt Detailed and probing interview and information gathering process from company management prior to investing gt Regular execution of On Site corporate inspections gt Detailed and through analysis of the company s business operations and financial statements with a purpose to gain complete understanding the company s organization future outlook and potential headwinds gt Sensible calculation process resulting in an estimated conservative value for the business gt A priority to first focus on what can go wrong avoiding losses and only then identify the potential future prospects and gains managing investment risks by insisting on quality or best of breed gt Strong emphasis on investment decisions being triggered based on undervalued or bargain prices in return for quality gt Actively looking for opportunities to take advantage of the mistakes the stock markets make from time to time gt A sound and sensible Sel discipline gt Allowance for flexibility no manger work with is restricted as to the size market cap or type market sector of business they can invest in People The following is a description of the human qualities need to see in a money manager prior to allowing them to make investment decisions on
Download Pdf Manuals
Related Search