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August 2011

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RS Weekly Update - Munger and Twaddle

August 31, 2011 – Comments (0)

Dear Fools,

Picking up where we left off last week, here is tendency #23 in Charlie Munger’s take on the psychology of human misjudgment from Poor Charlie’s Almanack.

Tendency #23 – Twaddle Tendency

First off, what the hell is “twaddle” and why does Munger bring it up? Merriam-Webster defines twaddle as “silly idle talk; something insignificant or worthless.” My guess is that Munger has had to deal with an awful lot of twaddle in his many years on this earth; haven’t we all?

Munger’s point with this tendency seems to be that we as humans have an inclination to twaddle away and this can cause some serious damage if it isn’t checked. Of course some gab more than others, so it’s not a blanket assertion.

As investors we see and hear all sorts of foolish (little 'f' foolish) talk out there and the Internet has done nothing but facilitate the dissemination of this twaddle. Now you can click on any site, blog, or the like and read whatever you want. It is extremely important to consider the source lest you get bitten in the rear for coming up with false statements or inaccurate conclusions.

We make it a big point to check our work here at The Fool through financial editing in order to make sure we have our facts straight. It’s much more dependable to get information from SEC filings or company sites themselves as opposed to third-party sources which may actually be nothing more than opinion, or even “twaddle.” End up using twaddle as your basis for investing decisions and you might not be investing for very long.

Foolish best,

Jason (TMFJMo)

One Stock At The Top

Here’s one that’s at the top of my watchlist: http://bit.ly/npNWAK

Jobs’ Resignation Was Priced In

I hooked up with the John Phillips Show out in LA to talk about Steve Jobs’ resignation and what it may mean for Apple: http://bit.ly/nrh2UI

Watchlist Recap

This was a fun recap with Roger Friedman of some watchlisters we talked about months ago: http://bit.ly/q64zc1

Portfolio Returns

Well it seems that this week saw a little improvement in both the Motley portfolio and Mr. Market's as well. As of market close on 8/25/2011 the Motley portfolio stood with gains of 2.64% and Mr. Market had lost 1.25% which means the Motley portfolio is beating the market by 3.89%. This gap has widened a bit from last week's 3.73%, so all in all not too bad in pretty tough conditions.

What I'm really waiting for is a big pop on one or two companies to really create some space. I think I have some great candidates, so time will tell.

Straight from the Onion

He’s just telling it to us straight: http://onion.com/pMw5SX   [more]

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RS Weekly Update - Munger, Leaders and Earnings

August 24, 2011 – Comments (1)

Dear Fools,

Picking up where we left off last week, here is tendency #22 in Charlie Munger’s take on the psychology of human misjudgment from Poor Charlie’s Almanack.

Tendency #22 – Authority-Misinfluence Tendency

Are you a follower or a leader? Mankind in general seems to be naturally subject to following leaders in some capacity. We have our President of the United States, religious people have God (or something to that effect whatever their religion may be), and companies have CEOs. So no matter what we do in life, in some way shape or form there is a leader involved. The problem is that just because someone is a leader doesn’t necessarily make them competent. And following poor leaders can lead to horrible results, so we need to be extremely careful.

Munger refers to a funny example in this passage from the writings of Cialdini (we’ve mentioned him before in these writings). A doctor left written orders for his nurse treating a patient’s earache that stated, “Two drops, twice a day, ‘r. ear.’” The nurse consequently turned the patient over and tried to put the drops in his anus.

My initial read evoked a nice chuckle, but there is a lot to be learned here. Did the nurse take the instructions too literally? Or was the doctor at fault for not being clear? Regardless, the nurse felt she was doing the right thing as she was following doctor’s orders. But she obviously misunderstood in some capacity. And to be fair, the doctor could've added the extra four letters and avoided all confusion to begin with. But what's done is done, right? Glad it wasn't me.

Of course we can go on and on about misinterpreted or confused instructions. They happen all the time. Heck I think I run into at least one of these scenarios every day with one of my daughters (at least it feels that way sometimes). But when we invest, it is imperative that we get leaders who know what they are doing. Their employees are following their orders and we need to know that they not only know how to lead, but also that they make smart choices and communicate them effectively. And as investors, we need to know what in the world they're saying, thinking and doing. So clear, effective communication is a tremendous quality in a CEO.

This one really takes me back to principle four of Investing the Stock Advisor Way which states: “Fish Where Others Aren’t” The gist of this is that we’ve no interest in following the crowds. We do our own thinking, our own research and make our own decisions. You might even say that we try to be our own leaders.

Foolish best,

Jason (TMFJMo)


Lessons for Leaders

I capped off our time with Rajeev Peshawaria with this article on the seven traits extraordinary leaders possess. In addition you can see the video of Mr. Peshawaria’s talk here at Fool HQ: http://bit.ly/nUdkee

Elbit Systems

Earnings for Elbit Systems look pretty good and they see a stronger second half of the year: http://bit.ly/omgVzI

Gap

Gap’s earnings for the quarter didn’t knock many socks off, but the company is making it through a difficult retail environment OK and I think they’ll pull through stronger than ever: http://bit.ly/osGSgo

Portfolio Returns

Man August 18 was BRUTAL. But as of close on 8/18/2011 the Motley portfolio amazingly enough is still in positive territory with returns of 0.98% (I'm just going to call that 1%) and Mr. Market is still in negative territory with -2.75%. So the gap has narrowed a bit from last week to 3.73%, but still beating the market and in positive territory so that's a good thing.

Straight from the Onion

Uh-oh…this doesn’t look so good: http://onion.com/n21bK0  [more]

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RS Weekly Update - Munger, Senescence & More

August 18, 2011 – Comments (0)

Dear Fools,

Picking up where we left off last week, here is tendency #21 in Charlie Munger’s take on the psychology of human misjudgment from Poor Charlie’s Almanack.

Tendency #21 – Senescence-Misinfluence Tendency

Senescence is defined as the condition or process of deterioration with age so it’s no wonder that Charlie mentions this as one of those items that can affect our judgment. The fact is that the older we get, we lose some of what we’ve got.

I always jump back to golf because it’s one of those things that’s easy for me to reference. At 38 years old I still feel like I’ve my best golf in front of me. I also feel like I’ve my best investing days in front of me too. Maybe I’m delusional, but I don’t think so…at least not yet. My father is a physician who has practiced medicine all his adult life. He also plays golf, invests and does a ton of other things which lead me to call him a real “renaissance man.” But at the age of 69 I swear he seems like he’s just getting started. Granted he has a great attitude towards life and takes care of himself, but I think one of the main reasons he stays so mentally fit is because he keeps himself so busy with the things that he loves to do. It keeps his body and his brain working which makes a big difference. Just like any muscle in the body the brain will atrophy when not used, so use it!

Munger makes the observation too that many older folks actually get pretty good at disguising age-related deterioration. Something as simple as the way one dresses may cause us to look past any age-related issues they may have. As investors, knowing your investments, who leads the companies, succession plans (if needed), etc. is crucial. The easiest example here can be seen in Berkshire Hathaway as Buffett and Munger continue to creep up in years. It doesn’t seem like much of a concern right now. But it will be and it’s not wise to kick the can down the road until it becomes a material issue. That’s why we continue to see so much emphasis on this in regard to Berkshire. Much (if not all) of the company’s success is based primarily on its leadership. Can it be as successful with someone else at the helm? Only time will tell.

The best thing we can do is to continue learning, studying and thinking all throughout our lives. It keeps the brain active and challenges us to see things from multiple perspectives. One of the older gentlemen I knew at a country club where I worked years ago made it a point to do the New York Times crossword puzzle every day. I would highly recommend that as a way to get some “mental exercise” even in the younger years. No doubt you’ll learn something new every day from a good crossword puzzle.

Foolish best,

Jason (TMFJMo)

An 11 O’Clock Stock Revisited

It’s been close to a year, so I thought I’d check in on my 11 O’Clock Stock: http://bit.ly/nALqxA

Starbucks

When you buy stock in a company you buy into its leadership and I like where Howard Schultz is coming from. DC needs to get it together and he’s another strong voice calling them out: http://bit.ly/nm3FAA

Porfolio Returns

I knew last week was going to hurt and I was right. Overall returns for the Motley portfolio dropped to 3.99% as of market close on 8/11/2011. (Hey, at least it’s still positive returns right?) The good news is that the market got hit harder and I gained a little more ground, so now I’m beating the market by 4.34% versus 3.99% last week. Hey, in times like these I’m gonna take what I can get!

Hello CNBC Asia

Last week was a busy one with the press considering the market’s yo-yo action. I had a couple of spots on CNBC Asia to chime in on market volatility and how we Fools try to deal with it: http://bit.ly/pD6EHq and http://bit.ly/oLAlw9

Straight from the Onion

I knew it!: http://onion.com/mT66wy

Jason owns shares of Berkshire Hathaway   [more]

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For Dedicated Black Ops Fans Everywhere

August 13, 2011 – Comments (2)

If you play Call of Duty, know someone who does, or just have any kind of a sense of humor, this post from Craigslist will give you a chuckle I'm sure:  [more]

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RS Weekly Update - Munger, Drugs & New Buys

August 10, 2011 – Comments (0)

Dear Fools,

Picking up where we left off last week, here is tendency #20 in Charlie Munger’s take on the psychology of human misjudgment from Poor Charlie’s Almanack.

Tendency #20 – Drug-Misinfluence Tendency

I guess maybe Charlie was looking out for me this week. Given all that’s going on in the market it’s quite fitting that this is the shortest of the 25 tendencies. The simplest explanation: drugs suck, don’t do them.

We all know people who have been affected by addiction to drugs. It has a widespread effect that touches many people. Worst of all it impairs one’s judgment and turns them into someone they’re not; that’s the scariest part. But there can be no doubt that simply put, drugs will impair your judgment and make you poor in every sense of the word.

Foolish best,

Jason (TMFJMo)

St. Jude Medical

Here’s my first new addition to the portfolio from the end of July; a medical device maker that I think has tremendous growth ahead and even with the market tanking I think I got it at a fair price: http://bit.ly/on171G

Panera Bread Co.

And today’s new buy, Panera is relatable to many and delicious. I think it’ll be in the portfolio for a long time to come: http://bit.ly/nDehuE

Higher One

Earnings are out for Higher One and they seem to be moving in the right direction: http://bit.ly/nuXlab

Porfolio Returns

As of last week the Motley portfolio widened the gap with the market beating it by 4%. I am sure this week’s action is going to hurt big time, but I still like the direction I’m headed and think that my Motley strategy will pay off in the end: http://bit.ly/nfPq36

Radio Free

I’ve had the great fortune to occupy segments on a few talk radio spots this week with Bill Carroll on KFI AM640 and Gil Gross on KGO AM810, both out in California. Check out my discussion board for links to the shows.

Straight from the Onion

Well that’s not very nice: http://onion.com/nTStUD

Jason owns shares of Panera Bread   [more]

Recs

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New Portfolio Buy Today

August 10, 2011 – Comments (0)

As promised, here's the newest addition to the portfolio:  [more]

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