October 26, 2011 (DJIA 11885.35, SPX 1242.74)
The following is an email we recently sent to some of
Here are some recent notes I have
taken, and could be of interest to you.
I think our portfolios are well
designed for the long term. I do think, but offer no assurances; we are
positioned for some promising future gains. We typically are invested in
companies with ample cash, little debt, and ability to pay dividends. The
typical dividend yield for our portfolios was approximately 2.6% at September
30, 2011. There is no guarantee this will continue, but our portfolios have
typically recovered quite a bit from September 30, 2011. In general, we are
outperforming the S&P through 10/25/11. Past performance is not necessarily
indicative of future results.
Here are a few links from our site
that I think are real appropriate for today’s climate.
An easy to read thesis on our largest investment,
National Western Life Insurance (NWLI)
An update to our investment strategy during this bear
Wisdom of Great Investors (notice how they buy when
there is fear and “blood in the streets.”)
Quotes I have written down over the last month.
drop in price, we sing the "Hallelujah Chorus." When burgers go up, we weep."
Warren Buffett -investing should be
like buying burgers.
habitually guided by the rear-view mirror and, for the most part, by the vistas
immediately behind them."
Warren Buffett 2001
recovery will falloff, but as of today, the recovery is still underway in our
Warren Buffett 10/11
"Our 5 largest
businesses will set records for earnings this year. Our retailing operations are
seeing same-store gains."
W. Buffett 10/11
carried 200K carloads last week. Highest in 3 years. Stuff is moving around the
USA, supplying merchants, etc."
W. Buffett 10/11
"Rule 1- most
things are cyclical. Rule 2- greatest opportunities come when people forget rule
Howard Marks 'The Most Important
"We think the
risk of being out of the market may exceed the risk of being in it."
Value Line 10/7/11
"The key to
making $$ in stocks is not to get scared out of them."
Please let me know
if you would like to have a discussion or meeting.
August 10, 2011 (DJIA 10872.14, SPX 1140.95)
Quick update and our strategy as the
markets have corrected > 20%
I wanted to give you a very quick update on some of the
market conditions, and our strategy. This note is in response to the
extensive economic news of our economy, the world economy, the recent
downgrade of USA credit by S&P (as well as one of China's credit rating
agencies), and the recent events and actions of the US Government in relation
to our debt ceiling and deficit.
As you know the markets have been suffering a correction
since around April 30, 2011. We have been studying the economy and our
investments a great deal. Had we known the markets would correct 20%+, we
would have exited our positions. Yet, even with turmoil, one can not know the
markets direction over the short term. Our portfolios remain invested in
companies that typically have strong balance sheets, sustainable business
models, and are priced at historically low multiples. Two of our larger
holdings have S&P credit ratings that are higher than the USA. Exxon and
Microsoft each carry Standard and Poors ratings of AAA, whereas the USA
carries a AA+ rating.
I think (but do not promise) that this is a typical
correction. Fear is certainly rampant, and if you recall, we have always
invested with the Buffett motto of "You want to be greedy when others are
We think (but do not promise) that our portfolios will
prosper over the long term. We liken an investor to that of a strong
swimmer. When a strong swimmer is in the ocean, and a large unexpected wave
comes, the swimmer does not fight and flail their arms in the wave. The
swimmer waits for calmness to arrive, and goes upon their way in the water.
This is what one should do in investing.
The following is a collection of
some Peter Lynch quotes I found most appropriate now.
"A sharp market decline is the historical norm."
"Market declines are great opportunities to buy stocks
in companies you like."
"Trying to predict the market direction is nearly
"There is always something to worry about."
“I’m more interested in how many stocks went up versus
how many went down. These so-called advance/decline numbers paint a more
“When you sell in desperation, you always sell cheap.”
“In spite of crashes, depressions, wars, recessions,
ten different presidential administrations, and numerous changes in skirt
lengths, stocks in general have paid off fifteen times as well as corporate
bonds, and well over thirty times better than Treasury bills.”
“I’d love to be warned before we go into a recession,
so I could adjust my portfolio. But the odds of me figuring it out are nil.”
“The trouble is the bells never go off. Remember, things are never clear until
it’s too late.”
The following are a few sections on our website,
which could be helpful in reminding you about long term investing, and the
norm of recessions and market corrections.
Please let me know if you want to discuss any of your
finances, portfolios, or anything like that.
I hope you enjoy the rest of your summer!