Tuesday, January 6, 2015

"Getting Better: Deliberate Practice for Investors"

From Street Capitalist,

"Instead of actually analyzing companies, they often become fixated on celebrity-investor navel gazing. What I mean is, instead of going out and finding undervalued companies, they spend most of their time reading about what famous investors are doing. They have no real knowledge of the companies they invest in aside from the fact that someone famous has a stake in the company. [...]

To me, the more types of companies you can value, the more opportunities you can have. By being a generalist, you can look at practically anything. You should strive to be a generalist because there are times when one sector or another becomes overvalued. If you strictly stick within that domain, you need to be extremely disciplined in your approach. What I have seen is that most investors end up lowering their standards so they can remain active."
He has an interview with small cap investor Paul Sonkin.
Tariq Ali: A lot of the companies you invest in are pretty small. Do you ever interact with the management of companies you invest in? How receptive are they to your ideas? Many of these companies have small shareholder bases, do you ever have to work with them to help promote changes in these companies?

Paul Sonkin: I guess. Yes and no. Sometimes they are very receptive sometimes they’re not receptive. I would say that we always talk to management over the phone and we’ll sort of have them walk us through the story and we’ll discuss their capital allocation decisions and just you know, go through various things like that. [...]

Tariq Ali: And the other thing I noticed with some of them is they don’t register with the SEC, is this ever a problem for you? Do you ever have issues trusting their financial statements?

Paul Sonkin: No, I’d say that usually the financial statements are pretty good with the ones that don’t file. Sometimes they just file once a year. But it’s sort of like how the old pink sheets used to be.

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