concentrated portfolio | rational investing philosophy
multidisciplinary decision-making process
Focusinvestor.com went live on January 1, 2000, to serve as a site that I could share insight on my personal journey as one of the “focused few”.The “focused few” are investors who believe in following an investment style that searches for undervalued publicly traded companies that have above average business models and that understand the importance of the concepts of Margin of Safety and Mr. Market as introduced by Benjamin Graham. Stay tuned and check back often for relevant topics on investing, how psychology can play an important role in investing, and highlight books that help further understanding of these concepts as well as covering the thinking of Warren Buffett and Charlie Munger.
IN 5 STEPS
Purchase understandable companies that have sustainable competitive advantages and management in place that have shareowner interests in mind. By following these criteria the investor should be able to continue to hold their shares for an extended period of time. Holding investments for an extended period of time has its own benefits: the compounding period is extended and tax payments are delayed.
Always invest using a margin of safety as advocated by Mr. Benjamin Graham in his seminal works, The Intelligent Investor and Security Analysis. The investor should endeavor to purchase part ownership of publicly traded companies for less than the present value of their discounted future free cash flows are worth today.
Concentrate your investment selections to avoid over-diversification. Focus Investors think differently than the majority of other investors. For instance, they believe that the way to be a successful investor is to only purchase their best investment selections. They also will invest significantly, both in terms of money and time spent studying the company’s economic characteristics, in an investment when they believe the odds of a investment outperforming the market over a long time period are in their favor.
Always remember that the one element that an investor has complete control of is what price to pay when initially investing in a business.
Focus investors think of the concept of risk differently that the majority of other investors. A focused investor thinks of risk in terms of opportunity cost and permanent loss of capital. Volatility doesn’t enter the picture as a type of risk; rather it provides the investor with possible opportunities to invest in companies at an advantageous price.
“…but the important thing is that when you do find one where you really do know what you are doing, you must buy in quantity…Charlie and I have made a dozen or so very big decisions relative to net worth, although not as big as they should have been. And in each of those, we’ve known that we were almost certain to be right going in.”
THE FOCUSED FEW
- Develop a Mental Framework
- Purchase High-Quality Companies at Bargain-Bin Prices
- Understand the Importance of Bubbles and Credit Cycles
- Learn to Engage in Special-Situation Investing
ON THE BLOG
“Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.”
WEB 2017 Berkshire Hathaway Annual Report
Intro to Risk Arbitrage
This article examines merger arbitrage activity, its benefits and the potential risks. . .
This article examines Markel Corporation (NYSE: MKL). Markel is a specialty niche insurance company. . .
The Price of Impatience
This short article discusses one of the most essential traits a successful investor needs. . .
COMPANIES TO WATCH
Every focus investor should develop a list of companies that have superior business models but which currently trade above their intrinsic value. Here are examples of these companies.
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