February 5, 2012

Factor In Your Income Sources When Seeking Diversification

Are You a Stock or a Bond

When it comes to diversification, you have to look at your entire life and not just your portfolio.  Several years ago there was a book I really enjoyed that dealt with this topic called Are You a Stock or a Bond?: Create Your Own Pension Plan for a Secure Financial Future. It explained some professions, like tenured professors, are like bonds - there is little risk of you ever losing your job, the pay it steady and almost fixed with small incremental increases based upon inflation, and you … [Read more...]

A Hedge Fund vs. a Mutual Fund

Joshua Kennon Mutual Fund vs. Hedge Fund

In the next 2-5 years, depending upon what happens at the private businesses we own, I am seriously considering launching either a hedge fund or a mutual fund.  Both have significant advantages and disadvantages. A Hedge Fund The Pros: With a hedge fund, I could do almost anything I can do now in private business.  This includes borrowing money to acquire real estate or whole companies.  Say I raised $100 million in assets and we had a good 15% year.  With a "standard" hedge fund … [Read more...]

The Sugar Refiner Shares We Own Are Surprising Me (and More Portfolio Updates)

Sugar Company Stock Certificate

I hardly ever talk about the portfolios I manage (the last time was when I added Campbell Soup to the blue chip reserve portfolio in Some Changes In the Portfolio), mostly because investment ideas are rare.  Still, I write about it to the same extent I would be willing to discuss something over coffee with fellow investors so here are some thoughts about what has been going on at Kennon Green Enterprises lately. The shares of the sugar refiner I had one of my businesses buy only 3 months ago … [Read more...]

Value Investing from the Goldman Sachs Chief Investment Officer

Eileen Rominger, the Chief Investment Officer at Goldman Sachs, told Fortune magazine how she, as a value investor, ranks companies.  She had a very good answer.  It's a sound process. Fortune Magazine: You've been a value investor for 30 years.  How do you decide whether a stock is attractively priced? Eileen Rominger: There are two components.  We believe in using industry-specific approaches to valuation.  So we don't just use price/earnings, for example.  If we're going to buy an … [Read more...]

The Postman Just Brought Gifts

Benjamin Graham on Value Investing Book with a Giorgio Armani Fountain Pen in Gold

The mail just arrived. I have the new Sears Holdings 10K, the Union Pacific 10K, the Panera Bread 10K, the Charles Schwab annual report, and a host of others. How on earth am I supposed to write now? I want to read! … [Read more...]

How to Find Investment Ideas

Wal-Mart Stores Stock Certificate

Years ago, I wrote an article called Finding Investment Ideas for Your Portfolio for About.com, a division of The New York Times.  I've been thinking for the past few days about how it is that I seem to come across so many opportunities and then I realized that most people like me are always looking whereas the average American isn't. By that, I mean that every time I walk into a business, without exception, the first thought that occurs to me as I look around is, "I wonder if this company … [Read more...]

John Templeton and Value Investing

John Templeton was a billionaire mutual fund pioneer that specialized in using a value investing strategy to buy stocks around the world.  By practicing a disciplined version of Benjamin Graham's teaching on a global scale, Templeton amassed an astounding record that made shareholders of his fund wealthy and earned him hundreds of millions of dollars in well-deserved fees. Toward the end of his life, John Templeton ran his international investments from his mansion on Lyford Clay in the … [Read more...]

Using Cash to Increase Your Value Investing Returns

Cash In Your Value Investing Portfolio

One of the least discussed secrets of great practitioners of the value investing strategy is the use of cash, cash equivalents, and bonds to augment returns.  From Benjamin Graham and Warren Buffett to Wallace Weitz and Marty Whitman, intelligent use of excess funds has as much to do with growing your capital over the long run as does selecting individual common stocks.  We're going to look at some of the techniques that have been used by value investors to manage their reserves, and the role … [Read more...]

Focused Value Investing Strategy

Focused Value Investing

The focus value investing strategy is different from traditional, Benjamin Graham value investing strategy because it is based upon the idea of putting money into more of an investor's "best ideas", as Warren Buffett put it.  Some value investors despise focused investing, while others swear by it.  I'm always very hesitant to talk about this particular strategy on Investing for Beginners where I publish my investing articles for total newbies, mostly because some lazy person may not study … [Read more...]

Peak Earnings – A Common Value Investing Trap

Toll Brothers Stock Chart - The Value Investing Trap

Peak earnings are a common value investing trap that most often hurts inexperienced investors who look only at the earnings per share and not the underlying driver of those profits.  The last big round of peak earnings value traps occurred at the end of the housing bubble.  By knowing what to look for, you'll be better equipped to spot value traps, lowering the chances your portfolio will be damaged by them. What Is the Peak Earnings Value Investing Trap? The peak earnings value investing … [Read more...]