July 5, 2005 Some notes to my weekend readings by Charles D, Ellis, CFA
1. I read an article from Financial Analysts Journal written by Charles D. Ellis, CFA. The article was titled, “Tommy Armour on Investing.” Ellis related how a world class golfers techniques can help the investor. Here are some notes to the article.
a. “Action before thought is the ruination of most of your shots.” Tommy Armour
b. “The way to win is by making fewer bad shots.” Tommy Armour
c. “Play the shot you’ve got the greatest chance of playing well, and play the shot that makes the next shot easy.” Tommy Armour. Ellis changed this a bit for investors. He wrote, “Make the investment decision today that makes holding on for the long term easy.”
d. ” We all know—even though public confessions are quite rare—that the main reason for selling stocks is inadequate research and judgment at the time of purchase, just as the principal cause of divorce is inadequate consideration before the
wedding. Wouldn’t we do better as investors if we concentrated our investments on those stocks that we have good reason to conclude—from thorough research—have the greatest chance of doing well over many, many years? And isn’t this the difference
between speculation on the price others will pay versus investing to own?” Charles D. Ellis, CFA.
e. ” Armour would want us to understand that the shrewd way to go forward is to take more time, have more knowledge and understanding, play to our strengths, invest in the ways we do best, and make investment decisions that make the next decision easy. As Armour says, “Every golfer scores better when he learns to play within the limits of his capabilities.” And in investing, our capabilities are always relative capabilities.” Charles D. Ellis, CFA.
One of my favorite investment books is written by Ellis, “Winning The Loser’s Game.”
2. The other Ellis article I read, also from Financial Analysts Journal was called “Investing Success in Two Easy Lessons.”
“Don’t Lose”
a. He mentions that the secret to winning in investing is simple: ” Plan your play and play your plan to win your game. And if you do not think and work that winning way in investing, you will, by default, be playing the Loser’s Game of trying to “beat the market”—a game that almost every investor will eventually lose. and clearly.”
b. He mentions a meeting with a senior partner from when he was just out of grad school. The meeting was with Joseph K. Klingenstein. One of the associates asked Mr. Klingenstein, “how can we be rich like you?” Ellis discusses how Klingenstein seemed angry at first, but then Ellis noticed, he wasn’t angry, just thinking. Klingenstein responded before leaving the room by saying, “don’t lose!” Everyone thought it was a stupid answer to a stupid question. Now Ellis realizes that Mr. Klingenstein gave them all the answer to successful investing in those two words.