When Mr. Schwab arose, the 1,100 guests sprang up as one man and with cheers, handclapping and waving of napkins greeted him. This was a common scene for Schwab as documented in just one of his biographies “Industrial Genius” by Kenneth Warren. Mr. Schwab stood smiling for several minutes while the enthusiastic demonstration continued and then repeatedly motioned with his hands that it was time for his friends to sit down… [more]
“He who moves mountains starts by carrying away small stones” [more]
In what is a few minutes (pages) Mark Sellers covers the margin-of-safety principle of both great businesses and great investors without omitting any central information. It's quite the personal checklist for the aspiring investor. Amazingly too, many of the 7 characteristics he outlines are already determined before an investor even makes their first stock selection. Taking a bit from Buffett who has said 'treat your friends like investments' I often think which of my friends would be the best investors. Some are too impatient and need to see immediate returns on whatever they do. Maybe the student who gives up on the major they selected, as it was far harder then they had initially perceived even though it's their dream. Others have egos that extend their abilities to a point where their own efforts become detrimental. Maybe the friend who plays the game 'Risk' and is hell-bent on world domination only to spread their forces too thin losing everything when the goal is so close. Some are great at earning money but too reliant on the institutional imperative (or societal one) of where to place it. Maybe that concert or clothing that everyone is going to or getting respectively. We can also call these fads and they end up yielding the long-term greater success for a fleeting short-term incentive. While all these examples may seem trivial they lend clues to an individual's personality and ultimately their decision-making process which is central to investing. Out of the myriad friendships that I have developed at my alma mater their might only be a very small handful of persons that I could line up with these traits. There are even fewer who have the appropriate competitiveness and desire to be great at what they will ultimately devote most of their life to. That 2% that Sellers talks about are really those individuals that can balance these abilities with honest self-assessment and enduring courage.
Letters from the President and Chairman [more]
Lets just say I'm expecting my 160+ points back from this underperform pick. Let me just walk you through why I chose this stock as an underperform. First off its financial situation. Subtracting goodwill they basically have negative equity. The company has a mountain of debt to go with that. While they do have significant assets delevering should be especially challenging in this period of asset devaluation and dwindling cash flows. On to earnings, or the lack thereof. The company has booked more than $4 Billion in losses over the past three years. Not only does the company suffer from greater and greater indebtedness but they suffer from the economic conditions that limit travel their main business segment clearly. At least revenues are remaining flat but at a consistently higher cost. Here are some of the risks pulled from their most recent annual report. [more]