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Powerful Lessons Learned from Successful Long-Term Investing

Join us as we explore best practices and key success factors in long-term investing based on decades of experience with investment clubs and individual investors.

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Powerful Lessons Learned from Successful Long-Term Investing

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  1. October 15, 2011 Presented by: Mark Robertson Founder & Managing Partner, Manifest Investing markr@manifestinvesting.com

  2. No investment recommendation is intended. This is an educational demonstration. The information in this presentation is for educational purposes only and is not intended to be a recommendation to purchase or sell any of the stocks, mutual funds, or other securities that may be referenced. The securities of companies referenced or featured are for illustrative purposes only and are not to be considered endorsed or recommended for purchase or sale by Manifest Investing or AAII or NAIC/BI. The views expressed are those of the instructors, commentators, guests and participants. Investors should conduct their own review and analysis of any company or fund of interest before making an investment decision. Securities discussed may be held by the instructors in their own personal portfolios or in those of their clients.

  3. What are the most powerful lessons learned from multiple decades of successful long-term investing?  Join us as we explore best practices and examine the key success factors based on working with the most successful investment clubs and individual investors.

  4. Most important factors for selecting long-term investments Most important components of fundamental analysis Key aspects of momentum and sentiment: technical analysis

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  7. Rappahannock (2008-Current) Overall annualized relative return is (+5.4%) 1-Year relative return is +14.4%

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  9. 11

  10. 1. Commit. (Invest regularly) Study opportunities carefully. 2. Buy high-quality companies when they’re on sale and Hold ... As long as it makes sense to do so. 3. Prudently diversify by size & sector and allocate. Be a diligent owner. Experienced investors should be willing to explore deep-value opportunities and engage capital preservation strategies.

  11. Growth: Diversify by Small, Medium & Large Lost Decade 13

  12. Be patient. Be disciplined. Imagine. 14

  13. Do Moats (Quality) Matter?

  14. 18

  15. Average = -19% 19

  16. Establishing Expectations Forecasts 1. Growth 2. Profitability 3. Valuation 20

  17. 21

  18. Big Picture Turbulence, Temporary or Terminal? Thoughts, Actions?

  19. 23

  20. Gauging Momentum: Relative Strength Index (RSI) RSI is based on closing prices www.StockCharts.com

  21. Few Moments with Desmond & Elder: Sentiment http://www.ritholtz.com/blog/2011/02/qa-paul-desmond-of-lowrys-part-ii/

  22. Changing of the Colors: Advent of a Bear Market?

  23. Where are we “now?” Potential tipping point? 27

  24. Selling a stock is not un-American. Don’t hold because you’re stubborn and don’t let the tax tail wag the decision dog, either. Take advantage of selling opportunities when you have a good reason. 1. You need the money. This one is personal. Your own life circumstances (college, a vacation, new car, new house, doctor bills, child’s wedding, bail money, church offering plate) dictate the need. Update your company studies and sell the one that makes the most sense, often the one with the lowest expected return. Source: “When to Sell: The Challenge of Reason” – Better Investing (September 2004) 28

  25. Don’t be afraid to sell. Portfolios CAN be improved! 2. Because fundamentals (quality) are in decline. Watch changes in management, slowing growth rates, declining profit margins, weird footnotes... and the FBI and SEC. 3. Because you can make the portfolio Better! Improve the expected returns. Maintain the quality of the holdings. Keep the overall sales growth forecast (or dividend yield) strong enough. Prudently diversify. 29

  26. 1. We’re here for the returns. Build an understanding of and expectations for your companies. 2. Quality matters. Excellent companies persist and provide protection during bear markets and corrections. 3. Design and manage portfolios with an emphasis on return forecasts, overall quality and the average growth of the holdings. Rinse. Repeat. Build an awareness of the tidal powers of momentum and sentiment. Discover discipline and practice patience.

  27. Trends/Forecasting … 20-year trailing average of ~3% ... Larger sample at 5.3%

  28. Housing Price Index (Warren/Troy/Farmington Hills) … 20-year trailing average of ~3% ... Larger sample at 5.3%

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