The Weekend Bulletin (#34)

A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.

Jul 11, 2020

Dear Readers,

Thank you for the valuable feedback that you have provided through the survey. For those that haven’t, this is the last reminder to do so. I’ll be closing the survey next week, so please head here while you still have the chance. It will be very helpful to me in making this bulletin better.

As a gesture of thank you, I will be giving out a book each to five of the most helpful feedbacks that I receive. This book can either be one that I select, or one of your choice, subject to a maximum value of INR 1,000 per book.

I also promise to summarise the survey findings for everyone to see (although your individual feedback will be known only to me). You can find a summary of the feedback received so far here.

Section 1: Investing Wisdom

"We like investments where the risk is time, not price."

Private investor journeys make for very interesting reads, for their actions are not bound by the pressure of investment committees or demanding clients. Their investment results are a true reflection of their own skills, brevity, and biases. This is a story of two brothers that have remained under the radar for decades (despite the article being dated in 2006, not a lot has been heard of the brothers since). But their story is intriguing: not more than ten investments at a time usually, invest for 2-5 years at least, investments are based on a lot of macro analysis, unconventional valuation methodologies, heavy dose of activism, a very high rate of compounding (i'll leave it to you to calculate how much). Pretty unusual for us regular stock market investors and therefore definitely worth a read. Don’t skip this one.
Running a similar philosophy (6 holdings, activist investing), but a public fund is Atlantic Investment Management. And their investing track record is equally intriguing: “Since the inception in 1992 of the Cambrian Fund strategy, our flagship fund, almost 25 years ago, there have on balance been six positions at any given time. So, we have remained highly concentrated all along. Our cumulative net return over the past almost 25 years is almost 4,400% versus the S&P 500's total cumulative return of 860%.” An interesting contrast between the two investors: while one shies away from the public eye, the other can’t stop talking about the minutiae of his holdings. This interview has all the details.
When it comes to investing, never say never. Here are a few charts reasoning why so.

Section 2: Mental Models & Behavioral Biases

Change is discomforting but inevitable. Over time, everything changes - in life and in investing. Businesses transform for better or for worse, moats erode or get stronger, investor preferences change from growth to value to stories - you get the drift. In his signature storytelling style, Morgan Housel explains why investors need to never settle, or 'keep running'.
This is a very interesting observation of a new mental model called ‘empowerment loops’. Think of it as a subset of network effects. However, rather than building a network of buyers and sellers, it bridges the gap between the ‘elite’ (not necessarily financially, but creatively) and the ‘masses’. For example, blogging (Internet) took writing from the professionals to the masses; Substack (the platform hosting this newsletter) is now helping bloggers and journalists monetise their talent directly without the need for aggregators like newspaper. Others: Ford -> automobiles, Harley Davidson -> race motorcycles. What businesses come to your mind after reading this? Let me know by leaving a comment below.

Section 3: Lessons From History

"...there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.”

History doesn't repeat, but it rhymes. We all know this, but we pay little attention to it. This is because, as this article posits, living through a bubble that is yet to burst is very exciting and the asset class or the economic environment is never the same (we cant draw from history directly). We learn the lesson only once it is too late.
Do starting valuations matter? Should you worry only about the quality of the business and its growth prospects, or should you also care about the price you are paying, even if your investment horizon is ten years? Are great businesses always great investments? This and more covered in this article (free article, but log-in required to access). If you are in a hurry, read from the section titled "Nifty FANGAM". Also pair it with the article under this section in Issue #27.

Section 4: Personal Development

Her father was early in breaking off the shackles of a monthly salary. She is early in distilling wisdom from knowledge. Like her father she is not just a fast learner but also a good writer. And this 15 year old's life lessons will make you wonder about your own life lessons.
If the above wasn’t enough, then read this other post where she deliberates on the education system and justifies her decision to quit schooling. Such a wonderful mind!

Section 5: Trivia

A question for you: You are trying to help an overweight friend lose weight. You see him (not using her for an obvious reason) about to eat a dessert. You snatch it from him and run. He follows. You reach a fork; one road goes downhill while the other uphill. Which road will you take to outrun your friend? Leave your answer ('uphill' / 'downhill') without any explanation in the comments below. I'll share the correct answer and a related mental model next week, if we get enough answers.