Voting vs. Weighing

The father of value investing, Benjamin (Ben) Graham.

When I began with RBC Dominion Securities Inc. in August of 2001, Ben's book, Security Analysis was a suggested reading. Celebrating a wonderful career and 23 years this month with arguably CDA's best bank, and most certainly CDA's most secure and best capitalized one, RBC DS has been good to me and I've been good to clients, mostly -)

When the world's modern day, and most famous investor Warren Buffett was born in 1930, he made his first stock purchase at age 11. Under Colombia University's legendary Ben Graham, the relationship prospered and enabled Buffett's study of the securities profession, my passion as well since I was 16, to the Buffett Partnership @ age 25. Clearly Buffett idolized Ben Graham.

Ben Graham's famous line "in the short term the market is a voting machine, in the long term a weighing machine" has stuck with me forever - and is far more prevalent today than it has ever been. Many want to "vote" short-term, get in, get out, yet, when "weighed" and remained with world-class companies, the "weighing" outperforms virtually all else.

How does one "weigh" a security?"

1. Focus on track record of companies (and money managers you intend to hire 5-10 years min.) and stick with only the best of the best
2. Add to them when lower
3. Only sell, or "vote" when they become too large a position (10% plus) in the portfolio (because of growth) and so we TRIM, rarely outright sell
4. Cut or sell if the business cut's their dividend - since we focus on total return, NOT DIVIDENDS, we don't worry - all our companies have been increasing their dividends over time
5. Don't worry, be happy

While we don't know what the future holds, we have been adding to our favorite names recently, and updating our core holdings to reflect valuations now. We focus on total return over time, have achieved excellent results when we don't venture from these rules of thumb above, and have always felt that buying a good business, with superior cash flows, is the single best way to grow one's base - while having full liquidity anytime to cover off any unexpected expenses. We never could emulate the above two men, nobody really can, yet we continue to follow their "weighing" machine mentality to ensure our clients are experiencing the best results we are possibly able to deliver.

Happy investing,

Lee A. Schaffer, PFP? CIM? FCSI? | Senior Portfolio Manager & Wealth Advisor | Schaffer Wealth Management of RBC Dominion Securities Inc. Direct: 905-764-5013 |800-268-6959 | [email protected] |