Behavioral Value Investor Newsletter #1

The stock I bought kept going down.

I was watching my hard-earned savings dwindle each day.

It wasn’t supposed to be like this.

It was 2000, and buying a tech stock was supposed to be a quick path to riches.

Cisco was rumored to be interested in buying this company. So why do more work?

There was no easy way to get more money.

I was already working two part-time jobs on campus to help pay for my MIT degrees.

And then Warren Buffett spoke on campus.

Here was this incredibly successful investor talking about:

• Competitive advantage
• Intrinsic value
• Investing for the long-term

Listening to Buffett made me realize I hadn’t been investing – I had been speculating.

I had no investing philosophy.

No investment process.

I had no idea if the company had a competitive advantage or what it was worth.

I started reading everything I could find on value investing.

I was no longer tempted by the hot tech stocks, now I was looking for durable businesses.

I got an investing job at Fidelity. Then I became an Equity Analyst at another firm, then eventually a Portfolio Manager.

Now, more than 20 years later, I am the Managing Partner of my own value investing firm.

If you are just starting to invest, first ask yourself: Are you an investor or a speculator?

Current Insights

The challenge you face in today’s market isn’t one of analysis. That’s the easy part.

The hard part is fighting your own worst tendencies and your biases.

I have little doubt that when the history of the current times is written with the benefit of hindsight that many will marvel at some of the market craziness that we are experiencing now. And ask how could people have been so foolish as to waste their hard earned savings in this way?

This will end. And end badly for many. When?

That I don’t know. And I don’t think that anybody without a time-travel machine knows either.

That’s what makes it difficult for many to just stay rational. It is temperament that distinguishes great investors from the rest. The ability to stay rational and think from first principles when many around them are doing anything but.

There are three tiers to the current equity markets in the U.S. There is clearly a Bubble tier of companies being wildly speculated in by "professionals" and retail investors alike. There is a tier of good businesses that is very expensive, but perhaps justifiably so if their fundamentals prove as good as hoped for and interest rates stay low. And then there is the inexpensive tier, which usually has one or more real or perceived problems with the business that is causing market participants to mark down the stock price.

What should you do with your money? Be very careful. In times like this it is far easier to lose your money than it is to make a good return.

Despite the fact that to most it seems like an easy time to make a lot of money. Or perhaps precisely because of that.

Resources That Will Help You Be A Better Investor

·        Behavioral Defense in Decision Making

·        The Low Cost of Inaction: Don’t Just Do Something, Stand There!

·        Interview with Dr. John Malone

·        Financial Bubbles of Historic Proportions - James Grant Interview

·        Charlie Munger at the Daily Journal 2020 Annual Meeting

·        When Should You Hold Cash In Your Portfolio?

·        How Should Investors Prepare For Inflation?

If you are interested in learning more about the investment process at Silver Ring Value Partners, you can request an Owner’s Manual here.

If you want to watch educational videos that can help you make better investing decisions using the principles of value investing and behavioral finance, check out my YouTube channel where I regularly post new content.

GARY MISHURIS, CFA

I am the Managing Partner and Chief Investment Officer of Silver Ring Value Partners, an investment firm with a concentrated long-term intrinsic value strategy. I also teach the Value Investing Seminar at the F.W. Olin Graduate School of Business.

Prior to founding the firm in 2016, I was a Managing Director at Manulife Asset Management since 2011, where I was the Lead Portfolio Manager of the US Focused Value strategy.

I began my career in 2001 at Fidelity as an Equity Research Associate after graduating from the Massachusetts Institute of Technology (MIT).