Charlie Munger once read a single magazine article, spent ninety minutes thinking about it, and made $80 million investing in the idea. The company looked like a disaster. It had a ton of debt after five spinoffs in six years, and its revenues shrunk because of the 2001 recession. Principal payments on its debt were coming due that the company couldn't make. I spent weeks reconstructing what Munger actually saw, down to finding the exact article he likely read in 2001. New series at The Owner's Memo. open.substack.com/pub/theown…

We often use the word "talent" to describe extraordinary performances, but it is not really an explanation at all. No one is called talented before they succeed. Daniel Chambliss spent many years of his life inside competitive swimming, through the 1984 Olympic Trials, looking for whatever separated the best swimmers from the merely good, and what he found were dozens of small differences in technique, habit, and attitude, many of them learnable. Chambliss thought many more people could be in the Olympic class than commonly expected. But we don't examine how, and instead rely on "talent" as a descriptor. Why? As Sartre put it, what people would like is that "a coward or a hero be born that way." The word flatters the people it describes, places them safely beyond comparison, and quietly relieves the rest of us of responsibility for our own condition. Investors do this as much as anyone. We hear Buffett tell amateurs to buy a low-cost index fund and conclude that investing well requires a gift. We skip past the condition he actually names, which is understanding business economics well enough to find five or ten sensibly priced companies with durable competitive advantages. That means reading, thinking, and patience, which require work and which is harder to excuse ourselves from. open.substack.com/pub/theown…

Phil Stutz on taking action...

The letter Bill Ackman received from David Rockefeller after Ackman's restructuring plan was voted down by the Board of Rockefeller Center Properties. Ackman was gracious in accepting the decision, and Rockefeller was appreciative. He still made great returns owning the stock, and the deal was the first high-profile one of his career. cc:@BillAckman

David Tepper started Appaloosa in 1993 after working at Goldman for 8 years and then raising $57 million with some help from Michael Price.

For those interested in more, I heard about Cloud Atlas after watching an interview of Kazuo Ishiguro, easily one of my favorite authors. Almost any book by Ishiguro is fantastic, and they’re all different, kind of like the stories in Cloud Atlas.

We almost always hear about how Lynch achieved a 29% annual return over 13 years, but almost never about how that performance was bifurcated - incredible in the first half when AUM was low and more modest in the second half when it was high. To outperform dramatically, you need to concentrate the portfolio. It’s hard to outperform when you are managing 1,000 stocks.

Nik Sleep and Qais Zakaria's performance over 12+ years managing Nomad, 20.8% per year.

Share buybacks Too many management teams see buybacks as a waste of capital that could otherwise go toward reinvesting in the business. (Ignorant politicians don't help either.) When prices become *so low* that the buyback is screamingly attractive, it can be a fully better use of capital. It effectively removes the shareholders who would accept the lowest price for their shares, and it pressures the share price upward (depending on its size), which can have a reflexive effect, causing employees, customers, and shareholders to feel like the company is doing well again.

I would love for someone to ask the CEO of Wise if he has ever read Nick Sleep's letters. I don't believe he's mentioned Sleep before, but the similarities between his business and Sleep's descriptions of "scale economies shared" is too similar.

"Envy represents a total net loss. There is always someone doing better than you." - Munger

I write The Owner’s Memo, a weekly letter about what it takes to be a great long-term investor and generate the highest returns. Each issue focuses on a great investment case study from the past or examines the lessons a great investor needs to remember. Start with “Tenneco Automotive: Charlie Munger’s $80 Million Bargain”. theownersmemo.com/p/tenneco-…

The idea that markets are highly intelligent prognosticators of the future is untrue, but it’s persistent and damaging. See charts of the history of forward interest rates as one example.

The investment records of great investors Source: Excess Returns by Frederik Vanhaverbeke

Peter Thiel handed Mark Zuckerberg a term sheet about an hour after meeting him for the first time. Charlie Munger needed roughly ninety minutes to decide to buy the stock and bonds of Tenneco, a company then on the verge of bankruptcy. The Owner's Memo #23 is about why the best investment ideas tend to be simple, explainable in a short paragraph and sometimes in a single sentence. I look at three examples that worked for different reasons: ✔️ Carl Icahn's investment in Apple in 2013, laid out in a 3,000-word letter whose key point fits in two sentences (and Warren Buffett's purchase of the same stock, at a similar discount, three years later) ✔️ Peter Thiel's $500,000 investment in Facebook in 2004, agreed to on the day he first met Zuckerberg ✔️ Charlie Munger's investment in the stock and bonds of Tenneco, a decision made in 90 minutes Keep it simple. A complex thesis carries risks beyond simply being wrong because, as conditions inevitably change, complexity has the potential to create boogeymen and cause an investor to bail out early. In fact, the Apple story contains a surprising example of exactly that, from the very investor who called the stock a "no brainer." open.substack.com/pub/theown…

The record of the system that Ed Thorp described in Beat The Market. He made 25% per year using his system, which involved buying common stock and selling short the corresponding warrants.

I'm becoming a little frustrated with all the slop out there. So here is Your Guide To AI Slop! ☑️ Openings that put the reader in someone's shoes. "Imagine you're a portfolio manager whose mandate…". ☑️ "Here's the twist" setups. "Here is where it becomes really interesting." Promising a payoff before giving it. ☑️ One-sentence paragraphs used for emphasis. "I like that setup. A lot." "That combination is difficult to replicate." ☑️ Punchy metaphors that close a section. "The legacy business is becoming the fuel." ☑️ Headers written as clever claims. "Management Is Saying the Quiet Part Out Loud," "The Target May Be the First Checkpoint, Not the Destination." ☑️ Hedging before and after big numbers. "That is not guidance and I would not treat it as such." The author keeps anticipating objections even-handedly. ☑️ Repeated key facts. The current price, the insider's purchase price and the target value each come back three or four times. The recap section at the end restates nearly everything. ☑️ Fixed intensifiers. "Particularly unusual," "very powerful," "surprisingly similar". ☑️ Admitted-skepticism openers. "Normally I would roll my eyes at that comparison." "One thing I had not appreciated before going deeper…"

Hendrik Bessembinder's landmark study Do Stocks Outperform Treasury Bills showed that, over 90 years, the vast majority of public stock market dollar returns was produced by a very small minority of companies. Of the 25,332 companies in the study, we can divide the stocks into three groups: 1⃣ Those that produced dramatic outperformance vs Treasuries (1,092 stocks or 4.3% of stocks), 2⃣ those that produced only modest outperformance (9,579 stocks or 37.8% of stocks), and 3⃣ those that underperformed Treasuries (14,661 stocks or 57.9% of stocks). Read more: theownersmemo.com/p/a-study-…

The Road to Self-Renewal is one of those rare pieces worth re-reading regularly... "The things you learn in maturity aren’t simple things such as acquiring information and skills. You learn not to engage in self-destructive behavior. You learn not to burn up energy in anxiety. You discover how to manage your tensions. You learn that self-pity and resentment are among the most toxic of drugs. You find that the world loves talent but pays off on character." - John Garder, The Road to Self-Renewal gsb-courses.stanford.edu/bui…

Interesting chart from Coatue. Stock returns are highly dispersed, but strip out the top 10 names and dispersion looks normal. There *are* cheap stocks out there despite the feeling that everything has surged.