Maximizing Time for a Recreational Investor

[valueventures]

Hi all,

Hope you are doing well. It's been a while since I've visited, as I have been busy preparing for CFA Level I (passed in December!) and recently transitioning to a new job. Now that I am settled, rather than continuing with the CFA Program for now, I plan to shift my focus to value investing.

As a recreational investor who plans to spend 15-20 hours a week studying investing / researching investments and writing an article or two, how would you advise me to make the most of my time? The equities investment universe is expansive, and it can be a bit overwhelming to filter it down to a more manageable field. This can feel especially daunting when one considers that many PMs (guys like John Huber, Connor Leonard, etc., who I follow) are full-time investors and feel that only a few companies per year are worth investing in.

I am planning to read the classics, use screeners (Finviz, Morningstar, etc.), use weekly Value Line research, and read this forum and other blogs. Please share any thoughts or feedback you have. I appreciate your help in advance. Thanks!

[cameronfen]

Hi all,

Hope you are doing well. It's been a while since I've visited, as I have been busy preparing for CFA Level I (passed in December!) and recently transitioning to a new job. Now that I am settled, rather than continuing with the CFA Program for now, I plan to shift my focus to value investing.

As a recreational investor who plans to spend 15-20 hours a week studying investing / researching investments and writing an article or two, how would you advise me to make the most of my time? The equities investment universe is expansive, and it can be a bit overwhelming to filter it down to a more manageable field. This can feel especially daunting when one considers that many PMs (guys like John Huber, Connor Leonard, etc., who I follow) are full-time investors and feel that only a few companies per year are worth investing in.

I am planning to read the classics, use screeners (Finviz, Morningstar, etc.), use weekly Value Line research, and read this forum and other blogs. Please share any thoughts or feedback you have. I appreciate your help in advance. Thanks!

I have a full time job and many other interests.  If you want to get the best returns with minimal effort I suggest cloning other people's thesis.  Follow a billion blogs/CoBF etc. and just pick the ideas other people have that make the most sense with you.  Because you won't have time for much personal research/exit stratagies make you protfolio as diversified as possible.  Sell when the thesis you cloned doesnt make sense any more even if the person you cloned is still holding.  It's not your research so mission creep is even more dangerous.  I would use a stop loss as well (perhaps only an informal one) to protect against ignorance.  also pair down winners, so they dont become too large of the portfolio.  It comes down to recognizing you don't know as much as the people who are pitching and you have to protect against that.  This stratagy is what I do.  I come up with maybe one original thesis a year and have some 30 or 40 stocks in my portfolio.   

If you want to improve your investing the above is an option but not the best.  I recommend deliberate practice based on books like Peak and other work by K. Anders Ericsson.  Basically practicing is not going to be fun.  But if your goal is to get better as fast as possible this is the best bet.  Pick a stock some superstar invested in like 5 or 6 years ago.  Read nothing about his/her thesis.  Look at annual reports and other documents from that time and try to engineer the investors thesis.  Then look at the actual thesis and evaluate what you picked up and what you missed.  This is the best way to become a good investor imo.  Repeat as many times as you can stomach. 

[John Hjorth]

cameronfen,

It's to me an interesting angle to investing applied by you, that you describe here. Where is your own soul in all this?

valueventures,

Is it about your own money alone, or are you considering attracting capital?

[abyli]

Hi all,

Hope you are doing well. It's been a while since I've visited, as I have been busy preparing for CFA Level I (passed in December!) and recently transitioning to a new job. Now that I am settled, rather than continuing with the CFA Program for now, I plan to shift my focus to value investing.

As a recreational investor who plans to spend 15-20 hours a week studying investing / researching investments and writing an article or two, how would you advise me to make the most of my time? The equities investment universe is expansive, and it can be a bit overwhelming to filter it down to a more manageable field. This can feel especially daunting when one considers that many PMs (guys like John Huber, Connor Leonard, etc., who I follow) are full-time investors and feel that only a few companies per year are worth investing in.

I am planning to read the classics, use screeners (Finviz, Morningstar, etc.), use weekly Value Line research, and read this forum and other blogs. Please share any thoughts or feedback you have. I appreciate your help in advance. Thanks!

Investing is simple but not easy, there is no shortcut.

[LC]

So I had this thought yesterday reading this forum. Since January I haven't done a single bit of stock research (combination of market highs, new house, and general life stuff). And when I post here I feel a bit guilty because I am not contributing much in terms of stock ideas lately.

But it made me wonder, if you polled everyone on this board, what is the one stock or asset that has made them each the most money over time? I.e. trading in/out of US banks, or BRK, Fairfax, etc. etc.

Of course, there are some situations like Eric where you make a craptastic ton of cash on a single event which will probably never reoccur. But over a lifetime, most I feel will make it trading in/out of stocks they "know". So why not go even further: just study one business/stock - for your entire life? I mean, if you become the de-facto expert, and you trade that stock with a value mindset (margin of safety, general conservatism, etc.) I think you would do pretty damn well. Just food for thought.

[Jurgis]

But it made me wonder, if you polled everyone on this board, what is the one stock or asset that has made them each the most money over time? I.e. trading in/out of US banks, or BRK, Fairfax, etc. etc.

Of course, there are some situations like Eric where you make a craptastic ton of cash on a single event which will probably never reoccur. But over a lifetime, most I feel will make it trading in/out of stocks they "know". So why not go even further: just study one business/stock - for your entire life? I mean, if you become the de-facto expert, and you trade that stock with a value mindset (margin of safety, general conservatism, etc.) I think you would do pretty damn well. Just food for thought.

OT?
I think the absolute amount "most money" has drawbacks. As portfolio grows, the latest stocks will make most money. Also slow grower kept forever may make more money than fast grower kept for 1 year, but fast grower has way bigger return rate. OTOH trying to figure out best-return stocks by adjusting for portfolio size and return rate is a bit complicated (so I will never do it), so perhaps your measure is not that bad. 

So I looked at my portfolio since the beginning of the universe (TM). I cannot account for all Liberty-Malone machinations, so I skip Liberties. I'm pretty sure they would be in the list though (some of them in positive, some of them perhaps in negative). My "most money" stocks then are: BRK (6 Jur-units money made), JPM (5), Gulfport Energy (4), ING pref(3), Exor (3), AAPL (3), Grand Terra Energy (3), First Industrial Realty Pref (3), Fairfax (3).

I think these cover a lot of what you said and also cover the issue I raised with your measure:
- Gulfport Energy (4), ING pref(3), Grand Terra Energy (3), First Industrial Realty Pref (3) were great returners from 2008-2009 GFC. So, once-in-a-lifetime event perhaps. Especially since my biggest losers (also since forever) include energy stocks in 2014-2016: about -2 Swift energy, -2 Denbury, -1 Baseline Oil.
- BRK (6), JPM (5), Exor (3), AAPL (3), Fairfax (3) are all "recent" stocks, which accounts for their bigger contributions than let's say pre-2009 holdings.
- AAPL annualized return is higher than BRK annualized return

Regarding your suggestion, I don't think I traded in/out of any of these stocks. I either bought and sold or bought and held. I don't think I'm gonna trade in/out of them in the future either.

[SharperDingaan]

So I had this thought yesterday reading this forum. Since January I haven't done a single bit of stock research (combination of market highs, new house, and general life stuff). And when I post here I feel a bit guilty because I am not contributing much in terms of stock ideas lately.

But it made me wonder, if you polled everyone on this board, what is the one stock or asset that has made them each the most money over time? I.e. trading in/out of US banks, or BRK, Fairfax, etc. etc.

Of course, there are some situations like Eric where you make a craptastic ton of cash on a single event which will probably never reoccur. But over a lifetime, most I feel will make it trading in/out of stocks they "know". So why not go even further: just study one business/stock - for your entire life? I mean, if you become the de-facto expert, and you trade that stock with a value mindset (margin of safety, general conservatism, etc.) I think you would do pretty damn well. Just food for thought.

This is pretty much what we do, and over a clutch of maybe 5-10 names at best.
At any one time we may be in 2-3 of them at most.

The name of the game is to hold dividend payers, and get to as many shares as possible funded by house money.
When the share is out-of-favour, continue to hold for the dividend (at 'zero' cost the yield is infinity). When the company really screws up, buy in a bunch more and average down (against existing shares with zero cost) - as you already 'know' the company very well, there is relatively little risk. When the company is flying high, sell enough to return your cost to zero. Your measure of success becomes an annual rise in dividend income (more shares + higher div/share).

Alternatively buy a non dividend payer, get to house money, sell the position when they fly high, and reinvest in either a distressed FI instrument, or something else that has just experienced a dividend cut. In most cases, quality firms will mean revert over time, leaving you with an inflated cash stream paid for with house money.

The time commitment is essentially maintainance.
Once a year we might do a deep dive, focusing on a targets continuing 'viability'. The conventional investment metrics (multiples, TWR, etc) are also pretty meaningless. Our focus is cashflow; hence at times our portfolio can be down 30%+ (terrible by TWR standards) while our cashflow is up 10%. If we DO NOT have to sell tomorrow TWR is meaningless, whereas cash remains king.

Obviously. not an approach you can use with OPM.

SD


 

[writser]

Of course I don't know how old you are / what your savings are etc., but, before we discuss HOW to fill 15+ hours, maybe first discuss WHY you want to fill 15+ hours? Unless you have like $1m+, surely there are better ways to spend your time?

[KJP]

Of course I don't know how old you are / what your savings are etc., but, before we discuss HOW to fill 15+ hours, maybe first discuss WHY you want to fill 15+ hours? Unless you have like $1m+, surely there are better ways to spend your time?

Along the same lines, what are you trying to do?  Build a track record to get a job at a fund?  Invest your own money?

Assuming you're only trying to invest your own money, I recommend the following from personal experience:

1) Read widely from blogs, forums and investor letters to find potential ideas; and
2) Spend time only on companies (i) that either really interest you or are very simple businesses; (ii) whose accounting you can understand; (iii) have no more than 2 significant business lines/divisions (even that's a stretch); and (iv) that are small/nano caps.

[Rod]

I used to research any stock that I thought might be cheap and that I had a decent chance understanding. But looking back I see that the work I did, while earning good returns, did not produce useful lasting knowledge of companies. These days I don't research any company unless I expect to have a long term interest in it. This is the checklist I use to select what to research:

1) Is this a company I LIKE?
2) Is this a company that I can UNDERSTAND?
3) Is there something GREAT about this company?
4) Is this company relatively IGNORED by other investors?
5) Will I want to follow this company LONG TERM?
6) Is there good reason to think it is CHEAP NOW?
7) Does this company add DIVERSIFICATION?

The last two items reflect timeliness. Ideally I want to build up a list of 10 to 15 carefully chosen companies that I understand very well and do almost all my investing within that group, adding and subtracting over time. I think this system will earn the greatest return not just on money invested but time. That should reduce the amount of research I need to do.