Value investing world blog nbc

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value investing world blog nbc

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Are You Exercising Too Much? Father's Day. Five Key U. Logistics Report. Sustainable Business. Wines have not been popular in America because, intrinsically, they are not continuous products. In , I outlined to the buyers where I thought we should go:. Any sane person does. We want continuous products which are profitable without creating a high-price image. For example, we were the largest seller of cheap Bordeaux blanc in the United States.

They should not be treated as adversaries. It is a creative exercise of developing alternatives. Their employees should be regarded almost as employees of the retailer. Concern for their welfare should be shown, because employee turnover at vendors sometimes can be more costly than turnover of your own employees.

And vice versa. Since we owned no trucks, warehouses, etc. Turnover is the most expensive labour expense! I reject management by committee. There are two magical physical thresholds that a retailer must achieve to be competitive: the truckload, and the ocean container load. These thresholds mark the limit of most economies of scale. Some choice quotes from Dr.

The productivity is not likely to ramp up until it is possible to be promoted for doing a good job at it. And that will happen in support work only when such work is done by separate, free standing enterprises. If a business is easy, every simple bastard would enter it. If you just ask them, you can find answers.

And you probably have still other systems that are not needed. On the left side of the ledger is the business in terms of how its customers see it: I call this the Demand Side. On the right side of the ledger are the factors that limit or determine the retailer's ability to satisfy those demands: the Supply Side.

All businesses, whether manufacturing, wholesaling, services, etc. And all businesses are subject to the ultimate supply-side constraint of cash: you can do anything, no matter how stupid, within that fearful symmetry, as long as you don't run out of cash. From my view, the Demand Side of Retailers can be analysed in terms of five variables:. The assortment of merchandise offered for sale.

Pricing: stability and relative to competition. Convenience: geographical, in-store, and time. Credit: the accepted methods of payment. Showmanship: the sum of all activities that result in making contact with the customer, from advertising to store architecture to employee cleanliness. Merchandise Vendors 2. Employees 3. The way you do things: "habits" and "culture" 4.

Systems 5. Non-merchandise vendors 6. Landlords 7. Governments 8. Bankers and investment bankers 9. Stockholders As in double entry accounting, the change in any factor must be matched by a corresponding change in another factor. For example, a decision to increase geographical convenience Demand Side obviously involves some change of policy with landlords Supply Side including the amount of rent you're willing to pay.

Consider how Barney's paid through the nose because they thought they had to offer the geographical convenience of being in Beverly Hills. How big a factor was this in Barney's subsequent bankruptcy? Was it Demand Side success at the price of Supply Side failure?

The lists above aren't much different from other businesses. What distinguishes retailing is the asymmetry of the fearful symmetry: the huge number of customers Demand Side vs. This is the exact opposite of a government defence contractor. All the people on the supply side have to be sold, too. This is mostly a Supply Side question, but the quality and attitude of the employees handling our customers is a Demand Side factor.

Getting there, however, was complicated. Despite being on opposite sides of the world, both businesses evolved complementary retailing practices: a focus on private label, above market wages for employees, a win-win mentality and continuous innovation. When it comes to the specifics of retailing, the analogy of super-volume stores better able to provide balance is a useful one.

As are the insights into economies of scale, pricing strategy, jettisoning poorly performing stores, the power of word-of-mouth marketing and the means to abolish bureaucracy through the outsourcing of non-essential functions. Every business has its own quirks and idiosyncrasies. Harper Collins. Bezos, Musk, Gates, even Buffett and Munger.

These are household names to both investors and businesspeople the world over. But there was one Titan that could rival them all, and indeed is regarded as the richest American to ever live. Who was it? He did it by owning a great business - which is key to long term investment success. An indomitable energy company whose activities spanned production, storage, transport, infrastructure, distribution and retailing that touched consumers and businesses the world over.

Standard Oil has long been considered the greatest monopoly of all time. Rockefeller started out in refining, recognising the benefits of scale, he amalgamated capacity to extract favourable terms from the railways. As refining competitors buckled, Rockefeller drove further consolidation; taking partial stakes, retaining management, and using scrip based funding ensured interests were aligned - creating emergent effects.

Rockefeller recognised the benefits in keeping prices low; the pool of potential buyers was expanded while new competition was deterred from entering the industry. Ever frugal, Rockefeller focused on costs and looked for ways to increase efficiencies; embracing new technologies, constantly innovating and leveraging economies of scale ensured competition was muted.

In , after forty-one years of existence, the Supreme Court ordered the Trust be dismembered into thirty-seven subsidiary companies [including those five companies mentioned above]. By his mid-fifties, Rockefeller had retired, yet the enormous tailwind of the automotive generation would make him far richer in retirement than in his working life. That was just a wonderful, wonderful book.

So I would certainly recommend that latest biography of John D. Rockefeller the first. While not an easy read bring a dictionary! He was thunderstruck by the happy math, which hit him with the force of a revelation. In the ninety years of my life, depressions have come and gone. Prosperity has always returned, and will again.

They gauged performance, exposed fraud, and ferreted out hidden inefficiencies. In an imprecise world, they rooted things in solid empirical reality. Despite the unceasing vicissitudes of the oil industry, prone to cataclysmic booms and busts, he would never experience a single year of loss. Daring in design, cautious in execution - it was a formula he made his own throughout his career.

Since oil was a relatively cheap, standardised commodity, transportation costs inevitably figured as a critical factor in the competitive struggle. During his career, Rockefeller cut the unit costs of refined oil almost in half , and he never deviated from this gospel of industrial efficiency. Searching for oil was wildly unpredictable , whereas refining seemed safe and methodical by comparison. Before too long, he realised that refining was the critical point where he could exert maximum leverage over the industry.

By then, Rockefeller estimated 90 percent of all refiners were operating in the red. He saw that his individual success as a refiner was now menaced by industrywide failure and that it therefore demanded a systematic solution. This was a momentous insight, pregnant with consequence. Instead of just tending to his own business, he began to conceive of the industry as gigantic, interrelated mechanism and thought in terms of strategic alliances and long term planning.

Rockefeller cited the years and as the start of his campaign to replace competition with cooperation in the industry. A trailblazer who improvised solutions without any guidance from economic texts, he began to envision a giant cartel that would reduce overcapacity, stabilise prices, and rationalise the industry.

He continued to value autonomy from outside suppliers. The Cleveland coopers bought and shipped green timber to their shops, whereas Rockefeller had the oak sawed in the woods and dried in kilns, reducing its weight and slicing transportation costs in half. These committees standardised the quality of subsidiaries engaged in similar work, enabling managers to swap insights and align their operations … These were chosen experts who had daily sessions and study of the problems, new as well as old, constantly arising.

The benefit of their research, their study, was available for each of the different concerns. By Rockefeller had gained control of a quarter of American oil production. By stimulating technological innovation and standardised products, it ushered in a more regimented economy. The world of small farmers and businessmen began to fade, upstaged by a gargantuan new world of mass consumption and production.

Perhaps no other American industry had such an export outlook from its inception. By , fully two-thirds of Cleveland kerosene was flowing overseas. It boasted far lower unit costs than competitors and relentlessly drove down costs over the years. A very smart monopolist, Rockefeller kept prices low enough to retain control of the market but not so low as to wipe out all lingering competition. His correspondence is replete about sick or retired employees.

Reasonably generous in wages, salaries, and pensions, he paid somewhat above the industry average. Since he aimed to convert competitors into members of his cartel and often retained the original owners. In general, Rockefeller was so eager to retain original management that he accumulated expensive deadwood on the payroll and, for the sake of intra-empire harmony, preferred to be conciliatory. Not only did Rockefeller urge underlings to take stock but made money abundantly available to do so.

As such shareholding became widespread, it welded the organisation more tightly together, creating an esprit de corps that helped in steamrolling competitors and government investigators alike. With employees receiving huge capital gains and dividends, they converted Standard Oil into a holy crusade. We must remember that Standard Oil remained a co-federation and most of its subsidiaries were only partially owned. A top down hierarchical structure might have hampered local owners whom Rockefeller had promised a measure of autonomy in running their plants.

The committee system galvanised their energies while providing them with general guidance. The committee encouraged rivalry among local units by circulating performance figures and encouraging them to compete for records and prizes. The point is vitally important, for monopolies spared the rod of competition, can easily lapse into sluggish giants. In his pocket, he carried a little red notebook in which he jotted suggestions for improvements and always followed up on them.

Whether riding out downturns or coasting on booms, he kept plentiful reserves and won many bidding contests simply because his war chest was deeper. In the manner of a modern corporation, Standard Oil created demand as well as satisfied it. In fact, the business world entranced him as a fount of inexhaustible wonders. In this respect, he was a natural leader; The more agitated others became, the calmer he grew.

If he feels rich on ten dollars, and has everything else he desires, he really is rich. Weak men had loose tongues and blabbed to reporters, while prudent businessmen kept their own counsel. With his customary thoroughness, Rockefeller had devised an encyclopaedic stock of anti-competitive weapons. Since he had figured out every conceivable way to restrain trade, rig markets, and suppress competition, all reform-minded legislators had to do was study his career to draw up a comprehensive antitrust agenda.

Two other factors encouraged a veritable feeding frenzy in the stocks. For years, the shares of Standard Oil of New Jersey had been depressed by the antitrust litigation, but with the litigation ended, they bounced back to more normal levels. And the explosion of the automobile industry created euphoria about the endless growth prospects of the petroleum industry. While technologies change and economies evolve, the business models that define these great companies can endure for decades, even centuries.

Since the days of Standard Oil, many businesses have achieved effective ownership of the choke-point. Collecting a tax of percent on every new skyscraper - if you wanted to build you had to talk to the Mob. The capital-light nature of some of these technology businesses with their first mover advantages, network effects, increasing returns and winner-take-all dynamics may mean even longer life cycles. Businesses which can compound capital for decades are the holy grail of investing.

Charlie Munger likes to remind us, "There are certain fundamental models out there that do not take the kind of ability that quantum mechanics requires. You just have to know a few simple things and really know them. Indeed, there was. The great investors never stop learning. More recently, the eminently successful practitioners, Howard Marks and Dan Loeb have each acknowledged their continued evolution as investors.

And the information they absorb can come from a multitude of sources. At MastersInvest we have looked at what can be learned from a variety of areas, many of which upon first reflection you would consider to be only tenuously related to investing at best. Interestingly though, often the better learning is to be found in the most unlikely of places. We are currently looking at cuttlebone and bird skulls to help design more efficient concrete structures for office buildings.

The combustion chamber in the abdomen of a bombardier beetle mixes two high explosives from fuel tanks with valves that open and close times a second—it is being studied in order to develop needle-free medical injections, more efficient fuel injection systems and more effective fire extinguishers. This field is called biomimicry ; a discipline that looks at nature's best ideas to inspire solutions to human problems. When it comes to continuous innovation and devising strategies for success, nature has a three billion year head start on us humans.

The world is just far too complex and ever changing. While everybody knows dogs have a much better sense of smell than us, few would realise they can smell things at concentrations of one part in a trillion. While trials have shown that dogs can detect human disease - cancer, diabetes, tuberculosis, and malaria - recent research shows bees have senses just as good. Imagine such an expendable resource providing an economical, easy and non-invasive way of detecting cancer.

No one who did not have some inkling of this through observations could ever have imagined such a marvel as nature is. Many great investors have found lessons in life within nature itself. In this fascinating treatise, the world-renowned animal behaviourist Thomas Seeley delves into the life of a honey bee swarm.

In the late spring and early summer, as a bee colony becomes overcrowded, a third of the hive stays behind and rears a new queen, while a swarm of thousands departs with the old queen to produce a daughter colony. Experimental studies have found these scout bees to have an innate sense of what comprises the ideal location; a small entrance, plentiful volume for honey storage to survive winter, a suitable height above the ground, etc.

Over time, each scout gradually reduces their marketing efforts regardless of how suitable the site is. The most keenly marketed sites attract more scouts who then inspect and, if appropriate advertise the site, creating a positive feedback loop. In contrast, lower quality sites are abandoned. When a quorum of bees is reached at the optimum site, the swarm will depart and take up residence in its new home.

An intelligent decision making process emerges from a group of less sophisticated beings; the wisdom of the hive is greater than that of any individual bee. This decision making process, honed over millions of years, almost always leads to the optimal site selection. There is no central decision maker; the queen bee plays no role in the process. There are lessons in this decision making process that can help improve group decision making.

Thomas Seeley recommended four things :. Every bee in the hive starts with a common purpose. When it comes to human decision making, ensuring a group understands the entities goals, have alignment and are incentivised appropriately, is fundamental. The scout bees possessed an innate sense of what constitutes an optimal nest site.

Filtering out unsuitable opportunities is an important part of the process. Each analyst however, must be discerning in their selection process before reporting back to the group. Other analysts can then independently investigate those companies and a debate can be held about the merits of each. While it might sound like common sense, collective groups of people have a tendency to make poor decisions. One recurring trait of the great investors is their dedication to continuous learning.

As humans, we understand just a fraction of what there is to know, which should make one optimistic about the amazing things we will achieve in the future. Its perfection and brilliance staggers me. When I think about all the flying machines, swimming machines, and billions of other systems that nature created, from the microscopic level to the cosmic level, and how they interact with one another to make a workable whole that evolves through time and through multi-dimensions, my breath is taken away.

I hope you enjoy the episode …. There are many companies in the world across a range of quite diverse industries. Some are simple by nature while others are infinitely more complicated, and you would have to think that with such a diverse spread that some businesses would be easier to compete with than others. Hard to copy? How about a fast food outlet selling chicken sandwiches? On the face of it, not that hard to compete with. You can replicate the ingredients, the store fit-outs, the locations, the marketing and the packaging - but the one secret ingredient you might struggle to copy is the culture.

And the stores are closed on Sunday! Truett Cathy who started Chick-fil-A, the chicken burger chain. I've been hoping that Chick-fil-A becomes a public company since then. The late S. Truett Cathy understood that a business has a higher purpose than just making money. From the humble beginnings of a single restaurant, S. In the process he created a multi-billion dollar fast food enterprise. Truett Cathy has shared his experiences and wisdom in a collection of short business books.

Truett Cathy quotes below. But I had established some good work habits and had an attitude that has been very beneficial to me. We take advantage of our biggest opportunities when we keep it simple , focusing on serving great tasting food in a clean, wholesome environment with great customer service.

He or she is always right. You know the kind of service you like to have from people behind the counter. Treat that one person right. Give him or her all of your attention for the moment. The customer is always right, even when he or she is wrong.

We advertise on radio, television, and in newspapers, but none of that takes the place of having customers as our cheerleaders. People do. Being successful requires more than just unlocking the doors every day. It is, however, always the best solution. They care about the quality of people on their team and the quality of the food they serve. Better people and better food means higher sales and higher profits for the Operator.

In our restaurant, both of those feelings must come from me, the Operator. Our company makes our seasonings, and another makes the breading. In the shopping malls we usually generate more sales per square foot in six days than many others do in seven. We also believe that by giving employees that free day, we attract the kind of people who want Sunday off because of their own convictions. We like to say we recruit smiles. A less qualified individual with a good attitude would be more welcomed at my company than a highly talented individual with a bad attitude.

I knew all the Operators by name, and most of their spouses and children. I want everyone who works at Chick-fil-A to feel secure that we will not resort to layoffs because we have overextended. We hire people because we need them. We must be very selective The wrong person working just ten hours a week can run off a lot of customers.

Character traits are most important. Everything else can be learned. I divided the tasks among other people more skilled in their areas than I am, and I trust them to do the job well. My policy has always been to select trustworthy people - then trust them! The Chick-fil-A franchise Operator Agreement is based on trust. What counts is the difference we make in the lives of others. They did. Fewer than five percent of our Operators leave the chain in any given year.

All of this fits into the Chick-fil-A philosophy that I first experienced when I went to work for the company. Some people will say customers are most important, but if we create the right atmosphere where our employees enjoy their jobs and have opportunities for growth, they will get a kick out of their work. Then that feeling will spill right over to the customer.

Our franchise Operators determine the success of the chain. Our operators own their own business , but our relationship is extremely close. Because of that, Chick-fil-A has one of the lowest turnover rates in the restaurant industry. To fuel the kind of growth we desire, we need eager, talented, honest, dependable, people-orientated Operators who are hungry to succeed in the restaurant business.

We love it when an Operator earns a lot of money because that means we are also earning a lot of money from the restaurant. The more successful we make the Operator, the more successful we are. Because we build the Unit and then lease it to the Operator, the ability and the character of the individual are more important than his money.

Experienced operators know better than anybody how to serve people quickly and efficiently. Therefore, we assign our unit realising that this is the most important decision we make. A restaurant company needs two things to succeed, capital and talent. Franchise restaurant corporations raise capital by selling the rights - usually for hundreds of thousands of dollars - to open a restaurant to people who have already succeeded in business and are looking for a good investment.

Sometimes the franchise owner will work directly in the restaurant, but most of the ones I have met are looking to own several units from which they draw income. Restaurant magazines are full of articles discussing franchisees blaming franchisers for their lack of success, when the problem is their own lack of time in the restaurant.

We must be careful about how we build them, where we put them, and who we put in there to run them. Anybody can open a restaurant. All it takes is money. But keeping one open is what makes the difference. He visited them when they were sick and sent food when there was an illness or death. Customers knew we cared. We encourage people to think and to experiment under reasonable circumstances. When you have a dynamic atmosphere, you never know where great ideas will come from.

They just come. They are quick to pick the most appealing restaurant , the the appearance of the people who work in it can affect such decisions favourable or unfavourably. Our drive-thru customers spend a lot of time back there, and if they see that area is clean and pleasant, they can be assured that everything is clean inside as well.

We awarded forty-six in alone. Other incentive awards for Operators include trips, merchandise and cash bonuses. Customers are very sensitive to change. Few things are more important that consistency in the food business. Instead, I leave myself and our company available to take advantage of opportunities as they arise. This is where so many start-up companies today make their mistake. Dreamers dream big, and they want to reach their goals quickly.

Financial experts tell me our strength would allow us to open restaurants at a much more aggressive pace than our current seventy per year. This can be particularly true with companies that make a public offering and find themselves staring at a pile of money. All they want to do is grow. But you have to digest growth as you go.

We try not to go into debt to expand. But if they have extended themselves to the limits of their finances and their talent, even a slight economic downturn can force them to lay off employees to salvage the company. I also prefer to own the real estate under our restaurants rather than to lease.

The initial investment is greater, but when the loan is repaid, the advantage is clear. Many others have achieved our size by offering ownership in their companies to the public. We have resisted and will continue to resist that status.

Too often, Wall Street analysts are more interested in profits than they are in principles and people. They feel a sense of significance. If somebody calls and asks for something, we give them something. From the outset we wanted to have a positive influence on all who came in contact with Chick-fil-A. Technology advancements have disrupted businesses and competitive moats have been filled like never before. Anybody who has happy customers is likely to have a pretty good future.

The same ingredients that have delivered Chick-fil-A success for more than 70 years, are likely to deliver success in the future. Cathy Truett did it. Truett Cathy, MastersInvest has spent a lot of time studying businesses and business leaders that have been successful, some remarkably so.

Those companies that have forged not only stellar reputations in their fields, but also those who have succeeded in industries where success is not a common commodity. And whilst a solid working knowledge of these success stories is vital for any investor to know, its also incredibly valuable to look at the other side of the coin - those businesses that have failed.

Warren Buffett and Charlie Munger have long espoused the benefits of studying failure. Armed with the foresight of what not to do can help an investor avoid the key risk to any investment program - the permanent loss of capital. An easy read, the book details the multitude of problems which beset GE coupled with a cornucopia of red flags to look out for in your own investments. Once a storied industrial leader, the last few decades have been nothing short of brutal for GE.

Notwithstanding the accounting misconduct, most of the tell-tale signs of trouble are qualitative and behavioural in nature. It was here that GE hammered out targets for sales and profits, setting the underlying assumptions for the financial estimates it would give investors. Under Immelt, the point of the exercise was determining how his executives would get to their financial targets - though not how they would determine what output the business would produce as a starting point.

This practice had been ingrained at GE from the days of Welch. Solve for the latter, and in time, the share price will look after itself. At GE the financials dictated strategy. You manage the inputs. Companies that focus on their customers will eventually boost their stock price. This is simple, but forgotten by countless managers. Often a CEO mistakes a short-term target, say an earnings per share target or a return on capital threshold, with a strategy.

Yet it is often when companies become exclusively profit orientated — and explicitly define this as their objective - that things go wrong. The end result of what investors seek, good shareholder returns, is invariably better achieved obliquely. All are misguided short cuts. Great businesses are all about empowering people, innovating, delighting customers, tolerating mistakes, focusing on the long term, upholding values, embracing change and remaining humble, to name but a few - none of which rated barely a mention.

And it was driving Jeff Immelt crazy. The stock market was the ultimate scoreboard tracking his performance. We know it is time to go big! This leads to all sorts of foolish behaviour. And lots of them do. Their focus is on the wrong thing, in our judgement. When we see the price of a stock posted in the lobby of the headquarters or something, things like that make us nervous. GE spent their time trying to please short-term investors. Our mindset is that we consistently build the company — if you do the right things, the stock price will take care of itself.

Smart investors recognise the business environment and economy are not conducive to a perfect earnings trajectory. GE failed to understand this, deploying unethical and in some case illegal short cuts to deliver. A numbers obsession finds employees and officers not managing strategically but manipulating numbers for results.

Businesses seldom operate in a tranquil, no surprise environment, and earnings simply don't advance smoothly. Charlie and I not only don't know today what our businesses will earn next year we don't even know what they will earn next quarter. But we are still under-owned by big investors.

In this time of uncertainty, why not GE? We go out of our way to look for management that cares about shareholder value but doesn't hype its stock. It was an unusually long-term projection , and its meaning was undeniable to Immelt. A few of these managers will prove prophetic — but others will turn out to be congenital optimists, or even charlatans. They massaged the numbers. Not as far as the guy at the top was concerned.

Great businesses are tolerant of mistakes. Great Leadership recognises businesses grow through trial and error. We would like that in the businesses we run. In fact, one of the things, we give very little advice to our managers, but one thing we always do say is to tell us the bad news immediately. See those studies again: companies with the most candid disclosures in their financial statements perform better over the long term and have higher share prices.

Companies that put their current positions and performance right out there for investors and analysts to study are the companies to put your money in. When the concerns were raised to leaders like McElhinney, they were stopped cold Under pressure from Welch, the division had stretched to make the numbers , including misreporting inventory figures to reduce the cost of goods sold.

Executives assigned targets to underlings, rather than lower-rung workers passing information up the ladder, so projections were based on market realities. The tension between ethics and the bottom line will al-ways be present. Indeed, such pressure motivates us and keeps us working and striving. But in this first sign of a culture at risk for ethical collapse, there is not just a focus on numbers and results but an unreasonable and unrealistic obsession with meeting quantitative goals.

And that can lead to a lot of bad things. One we have seen more than once, is when really decent people misbehave because they felt that there was a loyalty to their CEO to present certain numbers , to deliver certain numbers, because the CEO went out and made a lot of forecasts about what the company would earn. If you tell your managers you never want to disappoint Wall Street, and you want to report X per share , you may find that they start fudging figures to protect your predictions.

And we try to avoid all that kind of behaviour at Berkshire. If a culture is broken and toxic the best advice is to steer clear. Spurts don't work in this area. The really good manager does not wake up in the morning and say, 'This is the day I'm going to cut costs,' any more than he wakes up and decides to practice breathing.

Exceptional firms, however are involved in a permanent revolution against unnecessary expenses. Take a look at the dilemmas of managers in the auto and airline industries today as they struggle with the huge problems handed them by their predecessors. Pressure from the top to hit numbers coupled with an unwarranted focus on the share price, can tempt employees to fudge the numbers. The drive for numbers, number, numbers can take us right to the slippery slope and into ethical collapse.

By tweaking its estimate of the future cost of fulfilling those contracts, it could boost its profits as needed. There was no actual cash coming in… [They] can be red flags to investors… To pad the hole, GE now began selling its receivables - bills its customers owed over time - to GE Capital in order to generate short-term cashflow, making it appear that those newfound profits were matched by cash flowing in the door.

The company had overstated its earnings by hundreds of millions of dollars and stretched the accounting rules to their breaking point. Immelt wanted to appease Wall Street and convince them to place a higher multiple on the stock. Historically GE had enjoyed a premium valuation providing the currency for accretive acquisitions. As GE Capital grew, a complex finance business within an industrial company, Wall Street applied a lower multiple.

Immelt believed shrinking GE Capital would fix the problem. By acquiring companies with a lower price-to-earnings ratio, GE was getting an automatic earnings boost. They had resumes a yard long, most of them had personal fortunes, and they were presumed in all company to have unusually astute minds for business - not least because each one was a highly compensated director of GE.

Fear and silence are the enemies of an ethical culture. And the board is not going to be much of a check on that. It was utterly complex and filled with risk , and its tentacles reached everywhere in the company. This will always be true of financial companies. GE ventured into the highly cyclical oil business with optimistic forecasts, little experience and no margin of safety.

For much of his career [Immelt] often had an empty jet follow his GE-owned Bombardier or Gulfstream to far-flung destinations, just in case there was a mechanical issue that could lead to delays. Or that the cold diet sodas he liked were always present on a sideboard when he entered a room, no matter how far-flung the visit or conference room he walked into?

Under Immelt, the company believed that the will to hit a target could supersede the math, even when hundred of thousands of livelihoods - those of investors, customers, and suppliers, to say nothing of workers, retirees, and their families - hung in the balance.

The emergence of a smart investor on the register is no panacea for investment success. Even the great investors make mistakes. History is littered with similar corporate disasters to GE. It has always been more than a family company : it was - and continues to be - my family. There's a lot of research comparing the sustainability and profitability of family companies whether the family is in control or "just" works there, to non-family companies.

Because of their sense of stewardship, the family companies tend to be more profitable and more sustainable in the long run. You can make a nice place to work and still make money. Quality was, to use a modern term, a differentiator. As the company grew, I had to resort to dictation, but each letter was personalised - and each one signed by me.

They work for recognition. It wasn't enough to enable everyone to splurge on a yacht, but it was enough to make each person feel that we were all in this together. Instead, my mother hones in on a different platform to reach her customers: select specialty stores. If we were sold in Saks Fifth Avenue, then we had made it. Training is all about teaching people that they can achieve anything if they know what to do and how to do it and giving them the confidence to do it well.

I learned the importance of choosing my battles - and not to dismiss a competitor just because they seem innocuous. By , there would be 16, shopping centres scooping up 33 percent of retail sales… We owned the suburban stores. First to market always wins. Why let a competitor do it? Clinique's first computer, launched in , was used to determine skin type and deliver personalised results.

Competing against myself is an idea that never grows old. Who was going to compete with M. The answer, unquestionably, was Bobbi Brown Cosmetics. I had seen older brands, which were once market leaders fade away. So we kept on acquiring companies or launching our own competitors so that as new consumers came into the market, they would discover their own newer brands and they would make them theirs. The sampling and Gift-with-Purchase programs were like planting an accord.

This would be a valuable lesson in patience that I would apply to subsequent fragrance launches. The aircraft carrier was always accompanied by several destroyers, which served as a screen for the large ship. I would use that analogy in business: The small brands would protect the main brand.

I wanted to have limited distribution so that every store that was selling our product knew that the person they were selling to could only come back to them; conversely, the person who was buying revelled in the exclusivity of where she bought it. The Lauder brand would be synonymous with luxury , and Re-Nutriv would be the epitome and standard-bearer of luxury products. Know who you are and stick to it.

I decided that rather than selling only a product, our ads would sell the brand.. All our advertising would be orientated toward the brand. Focusing on the brand would hone our identity and be our North Star. Marketing a brand gives you more pricing power. If a product is a musical instrument, a brand is the entire orchestra. Looking back, this was probably the most important lesson I learned in my career: if you understood market segmentation, you understood everything.

Our fragrance advertising sold romance and prestige. We needed to launch or acquire competitors so that as newer consumers came into the market, they could discover new brands and make them their own. In order to survive, you have to take chances. Brands need to change to stay relevant. In order to grow, we needed to acquire not just new brands but new thinking.

The best way to acquire new thinking was to acquire a company with the founders , who could then, with our help, drive their original creation to new heights. C Cosmetics would have an organisation all of its own, from top to bottom. Distribution is forever. Over-distribution certainly killed the Prescriptives stores. And that is especially poignant, because over-distribution went against everything we stood for.

America loves growth. Growth is a story that gets people excited. I vowed that when I got out of the Navy and went into business, I would search out and hire exactly those people. So if they were the head of sales, they would sell better than me. If they were a copywriter, they would write better copy.

They all had to be better. I would respect and celebrate their abilities and never be threatened by them. Friendship is friendship but business is business. There is a point beyond which patience becomes neglect, Fail fast. Cut your losses. If you cannot get someone to produce for you in a satisfactory manner, it is almost always your fault and you should acknowledge that, honestly and with respect. Thanks to limited distribution, the stores got a fantastic return on investment.

I would add, we could only be as good as the people we are selling to want us to be, too. Each store was given an annual program, broken down month by month, of what we would do to improve our business - and theirs.

This was the secret sauce. In fact, I would turn it into a management formula. Every time I set up a new international office, I always wanted to have two people in charge: a man and a woman. Committees are the death of creativity and productivity. And I was always going to protect our market share, no matter how much it cost. As a private company, we had a huge advantage over our publicly held rivals: we could spend years nursing along a new brand or spending to gather market share because we didn't have to answer to our shareholders.

When the competition tightened its budget, we increased ours: we doubled down to protect out market share. Anyway, because our overhead was so low, we could afford to use - in fact, we could insist on using - expensive ingredients.

Instinct is something that is natural and ingrained: however, instinct has its foundation in experience. If you have enough experience, somewhere along the line, instinct will kick in. Then my instinct will take over and make the decision. We had a once-in-a-lifetime opportunity: to be the first brand of prestige cosmetics in what could become an enormous market. You automatically become the authority. They were my consumer research.

And it was free. These visits had several objectives. The first was to listen to our consultants and buyers and learn what was really going on. The second was to let the people in the trenches know that their work was recognised and appreciated, and inspire them to do better. The third was to send a message to everyone who worked for us that store visits were an important thing to do.

They are a learning tool for management and a motivational tool for everyone. Eisenhower shaking the hands of the paratroopers before they jumped on D-Day. What were people asking for? What were people liking - and not liking?

Which products would she like to see us add to the line? I loved those van trips. For example, on one of the van trips I was having breakfast at a swanky hotel with two friends who were art dealers. The discussion drifted to the fact that I would only fly economy.

Laughter helped smooth the path through hard times. What do I mean? A tactical mistake is one that, if you make it today, will only cost you today. A strategic mistake is one that, if you make it today, will cost you tomorrow - and tomorrow and tomorrow. You have to deal with the decades after decades. Knowing that it often takes years for a new brand to become profitable, we could afford to invest the time and money [when we were a private company] to let a brand grow at its own pace and mature in particular markets.

Some people think that if you introduce a new product today, you need to make money immediately or have to pull the plug. But if you hang in until year three, it will pay off for the long term. I start imaging what I want to see happen in three to five or even ten years from now, and then I worked backward to articulate steps I have to take today and tomorrow and next year and the year after. Instead of steering the ship on our own, we'd have to answer to partners.

The aims and considerations of outside shareholders are often very different from your own. They tend to eschew the long-term good for the immediate reward of short-term gains. We would try to enlist and support these new creators, make their operations more efficient, but never change their DNA. In return, we would offer them a chance to expand their company's name and footprint and their life. We could make them and their employees richer and happier.

I looked for companies that showed a track record and momentum, had an infrastructure that was working, and understood their distribution and how that distribution supported their brand. We could build upon and boost what their founders had started. I avoided big companies with entrenched identities. I wanted small businesses with plenty of room to grow - with our help. Newton's law of inertia says that an object in motion tends to stay in motion.

Look for brands and products that are growing; the consumer is giving you millions of dollars of market research that you don't need to purchase. This balance gives us competitive strength and consumer appeal. While the business has recognised and engaged many of the psychological tools of influence, long term sustainability comes from pleasing an ever changing customer. Leonard has been generous to share them with us and if we listen, it should allow our investments to harness a beauty of their own.

Lauder, HarperCollins Warren Buffett has long likened compounding to a snowball of sticky snow, and the longer the runway the snowball has to gather that sticky snow, the better. One manager that started rolling that ball a quarter of a century ago, was David Rolfe of Wedgewood Partners. I was fortunate to chat to David recently where we discussed his strategy, portfolio management, Berkshire and all things investing.

I hope you enjoy the insights as much as I did. Wedgewood was founded in by my current business partner Tony Guerrerio. I left PaineWebber in after being there for about a year and a half out of college. In early , shortly after the crash in , I was very fortunate to get a job as a portfolio manager at a big bank in St. Shortly after I joined, they merged with the second largest bank in St.

Louis called Boatmen's, and they kept the name Boatmen's. What's really key to this time period, is that the combined banks did a huge custody business. And pre-internet, it's kind of funny to think about this, we had annual reports, quarterly reports, mutual fund reports, money manager commentaries from the outside money managers that the clients used from the bank; all of that information came in and it was being filed.

So my continuing study of the great investors of the day really launched — particularly the focused managers. There's a file of all the old shareholder letters from Mason Hawkins at Southeastern before he launched the Longleaf fund , mutual fund reports from the original gang at Janus — Bailey, Craig and I think Marsico joined them in The great writings from George Michaelis at Source Capital.

A ton of Mario Gabelli. We even had the internal corporate reports from the old Templeton Investment Counsel before Franklin bought them in It was a goldmine! So in , I became a portfolio manager and what was really fortunate for me at a very young age all of the portfolio managers at Boatmen's Trust, were assigned fully discretionary equity accounts that we could do whatever we wanted with.

It was a one, two and three year rolling metric, audited by the old Arthur Andersen. So our current focused strategy was born back in early and I have been on the performance clock ever since going on 33 years. Louis that this investment firm out in St. Louis County, had a founding CIO who was leaving. And so with track record in hand, at the ripe old age of 30 and I knew all the mysteries of the stock market at the age of 30 [laughs], I met my partner, my then boss, Tony Guerrerio.

My predecessor, God bless him, he passed away recently, what a great guy. He was very nice to me. He was older than Tony, he retired. And I've been doing the same thing ever since Michael Quigley has been with Wedgewood since interning in high school. Chris Jersan joined Wedgewood in Chris has extensive investment experience as both analyst and portfolio management since entering the business in We are all analysts and portfolio managers — essentially generalists.

As CIO I have veto power. The culture of the team is one of intense collaboration on security analysis and portfolio management.

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Value investors ignore the news and hype around particular stocks. Instead, value investors focus on what they know. They look at the fundamentals of a company. Great companies with stocks at discount prices normally go up over time, giving you a handsome profit. Related: Is Investing Gambling? What You Need to Know. As mentioned, value investing involves buying mature, quality companies with strong fundamentals at bargain prices.

So what is intrinsic value? But value investing assumes that people will eventually realize the value of the company, driving the price up as they buy. Now, value stocks are typically from boring companies or companies in a temporary crisis we never said value investing was sexy.

Once value investors have calculated intrinsic value, they also have to apply the margin of safety formula :. You want the stock price to be significantly lower, just in case your intrinsic value calculation is off.

Related: Risk vs. Volatility: What You Need to Know. It involves a lot of research to select quality companies, but can be worth it over the long run. Here are steps to take to become a value investor:. Did you enjoy this intro to value investing? This course helps you learn how to become a successful value investor, step-by-step.

Check out the course here. Save my name, email, and website in this browser for the next time I comment. Elisabeth O. She is passionate about long-term investing to build wealth, avoids day trading and speculations, and loves a good Warren Buffet quote.

Posted October 6, , - Dylan in Investing. It includes fundamental analysis including economic, industry, and company analyses. Some of his older content really resonated with me, but over the last year, I've really enjoyed his takes on a variety of topics.

What I enjoy the most is he brings the math! Nick's Blog: Of Dollars and Data. Follow him on Twitter: dollarsanddata. Mike is one of the more well-known investing bloggers, who is now a published author several times over. He writes a lot of practical investing-focused personal finance articles, with a focus around diversification, reducing expenses and fees, and ignoring the media…funny coming from a blogger, but very valid none-the-less.

Follow him on Twitter: michaelrpiper. A favorite post: Why Invest in Index Funds. Ben's site is one of the newest blogs to make the list even though it's several years old. He's done a great job of providing excellent content with a focus on dividend stocks. He provides in-depth analysis, and his site is easy to read, with charts and graphs to back up most topics. He writes new content multiple times a week, so stop by and see if it's in your wheelhouse.

Ben's Blog: Sure Dividend. Follow him on Twitter: SureDividend. A favorite post: Challenging Buffett's 10 Year Bet. I discovered Barry's blog three years ago, and I have been reading it weekly ever since. He posts multiple times a day, so there is always something to read. I love his combination of investing insight and general commentary. Barry is a professional money manager who has been blogging since and writing for even longer than that.

I find it very easy to read, yet very interesting at the same time. Plus, his articles are on the shorter side on average , which is reader-friendly. Follow him on Twitter: ritholtz. Jeff is an amazing blogger and YouTuber and business person. He doesn't always blog about investing, but when it does, it's typically practical advice that anyone can follow. Outside of his blog, Jeff is a Certified Financial Planner and often posts about struggles he sees on his Facebook page or Twitter.

Besides that, his blog is probably the best designed finance blog out there. Jeff's Blog: Good Financial Cents. Follow him on Twitter: jjeffrose. He's managed billions of dollars in assets, and now is sharing his tips and advice "for the rest of us". On his show, he talks about some very interesting topics, and has a highly engaged member community.

Follow him on Twitter: jdstein. Todd is the founder of Financial Mentor, where he is a financial coach that helps people figure out their financial lives and invest for the future. Todd is a very no-nonsense guy, and from the few times I've met him and reading his articles, I enjoy his style.

His goal is to help people almost from a behavior finance perspective, with some common sense reality thrown in. Todd's Blog: Financial Mentor. Follow him on Twitter: FinancialMentor. Tadas Viskanta is the founder and editor of Abnormal Returns since it was launched in He is a really smart guy, and shares a lot of great content every day on his site.

If you want something to read in the financial world, stop by and check out his daily round up posts. The gold, though, is when he actually shares his thoughts - typically by aggregating some other peoples thoughts together and adding to it, or lambasting them. Either way, it's good stuff. Tadas' Blog: Abnormal Returns. Follow him on Twitter: AbnormalReturns. Today, he runs Wallet Hacks and shares what he's learned about personal finance, business, investing, and wealth. While some of his content isn't investing focused, his investing articles are top-notch.

Check it out. Jim's Blog: Wallet Hacks. Follow him on Twitter: wallethacks. I stumbled upon Rogers blog last year and have been impressed by the content. Roger is a financial writer and fee-only financial advisor who started the blog to share his industry knowledge and experience. Follow him on Twitter: rwohlner. Dividend Growth Investor has been a staple of the dividend and investing community for years. He is a long term buy and hold investor, so what you're going to find is fundamental analysis of well known dividend-paying companies.

The Blog: Dividend Growth Investor. Follow on Twitter: DividendGrowth. The Dividend Guy Blog was another early read of mine, and I appreciate their continued research and insight over time. What I enjoy about the Dividend Guy Blog is that not only do they continually put their opinion out there for others, but they back it up with concrete facts or other underlying rationale. Follow on Twitter: TheDividendGuy.

Furthermore, they put together their own economic calculators and showcase how they made them and what data they used. The Mad FIentist is a play on words - it's a site about a scientist achieving financial independence get the FI part now? The goal of the site is to show you strategies that can help you retire even sooner. There are a variety of articles that focus on tax avoidance strategies, and ways to invest to get the most out of your money if you plan to retire early.

Follow him on Twitter: madfientist. A favorite post: Lessons From Business School. A lot of readers have asked for a full list of investing blogs out there. There aren't a lot of good lists out there that share all of the investing blogs. Here's the list we've been working from to highlight "the best". Last year, we saw 6 blogs drop off the list, and only added in 3 blogs. There are a lot of great investing blogs coming out all of the time.

And some of these may fade away. If you know or run a great investing blog, please share it with us for potential inclusion in net year's list. You might also enjoy our curated list of the best money, personal finance, and investing podcasts or our list of the best personal finance YouTube channels. You can learn more about him on the About Page , or on his personal site RobertFarrington.

He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future. He is also a regular contributor to Forbes. The College Investor is an independent, advertising-supported publisher of financial content, including news, product reviews, and comparisons.

Other Options. Get Out Of Debt. How To Start. Extra Income. Build Wealth. Credit Tools. The Best Investing Blogs of This list of the best investing blogs of is in alphabetical order by last name so please don't think this is force-ranked in any way. Eddy Elfenbein, Crossing Wall Street.

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