The author J Dennis Jean-Jacques is very admirative of Warren Buffet.
Seven fundamental beliefs are:
- the world is not coming to an end despite what markets fears are
- investors are always driven by fear and greed, volatility is a cost of doing business
- inflation is the true enemy, macro predictions are a waste of time
- good ideas are hard to find but there are always good ones, even in a bear market
- the primary purpose of a public traded company is to convert company resources into shareholder value, make sure this happens
- 90% of succesful investing is buying right. Value investors tend to sell early
- volatility is not risk, it is opportunity
five keys to an investing framework
- is this a good business run by smart people?
- what is this company worth?
- how attractive is the price for this company and what should I pay for it?
- how realistic is the most effective catalyst?
- what is my margin of safety at my purchase price?
Understanding the business
Few sections of the annual report:
- Picture presentations: highlights by the company
- Letter to shareholders:
- MD&A (mgt discussion and analysis)
- Financial Statements
- Other information
- Description of company business
- Performance of the stock, finances, and changes in the last 5 years
- Board members and company officers, compensation
- Exhibits, financial statements
- 8K form reports material changes 15 days before they occur
- Proxy Statements: issued to provide information to shareholder before they vote on company matters
The other 5 key principle severely lack span and orthogonality compared to the 12 principles enumerated in The Warren Buffet Way
For completeness, other advice given by Munger would be
- Measure risk: All investment evaluations should begin by measuring risk, especially reputational.
- Be independent: Only in fairy tales are emperors told they're naked.
- Prepare ahead: The only way to win is to work, work, work, and hope to have a few insights.
- Have intellectual humility: Acknowledging what you don't know is the dawning of wisdom.
- Analyze rigorously: Use effective checklists to minimize errors and omissions.
- Allocate assets wisely: Proper allocation of capital is an investor's No. 1 job.
- Have patience: Resist the natural human bias to act.
- Be decisive: When proper circumstances present themselves, act with decisiveness and conviction.
- Be ready for change: Accept unremovable complexity.
- Stay focused: Keep it simple and remember what you set out to do.