Somehow, I was able to catch myself and not invest. I knew that it was outside of my circle of competence, even though it looked cheap and somewhat understandable at the time. I’m a huge fan of Mohnish Pabrai, but he made an admitted mistake and I was able to say no ahead of time. A rare good decision for me.
8. What investment decision do you most regret?
Since I’ve made lots of mistakes, I’ll give you two. First, I bought American Home Mortgage, as I just mentioned, and it went Chapter 11 a week or two later. I was trying to catch the falling knife, and I did shallow, shoddy, analysis. Bad times. Second, I bought 6 month calls on Discover after its spinoff from Morgan Stanley. Lost it all. Those two were awful investments, but I learned a good deal from each of them. One was that I needed to overhaul the quality of my research. The other was a pretty firm rule: no short term options.
9. Why do you blog?
I began blogging for two reasons. One, I am an avid reader of financial blogs myself, and I couldn’t help it. Two, I desired the opportunity to get my words down on paper and in the view of public scrutiny. It would allow me to improve my analysis and my framework, because if I’m wrong or sloppy, someone will hopefully notice and call me on it. Plus, I have to keep writing to keep readers reading. That means I have to spend time researching stocks, reading good articles, and really thinking about what I’m reading so I can write about it on the blog. There’s some obvious positives in there for someone looking to improve as an investor.
10. What's your best post?
Even though, by far, I focus most of my attention on the business I discussed
above, I very occasionally do little arbitrage situations, I mean like 3 of them ever. I think my best post was one called Jaclyn: Arbitrage for the Little Guys. I like it because I got to go, point by point, through the relevant materials in their filings, with direct information and my own analysis to back it up. The arbitrage worked out perfectly, and my analysis was on point. If only all of my investments, and public analyses, went so well. Also, my readers seemed to really enjoy it, got a lot of positive feedback.
11. What's your worst post?
I try to put my best foot forward every time I post, so this is a tough question. I’d give it to Of Toads and Princes: The Yahoo! Deal Falls Apart. Not necessarily because it was a bad post, it was fine, but that type of post is not what my blog is really for. I kind of just grabbed a news headline that stuck me and ran with my own criticism. Search technology is not in my circle of competence, so I shouldn’t be commenting on it in the blog. It’s called the Circle of Competence. For all I know, that transaction has the potential to create a search leader out of Microsoft. I won’t be commenting on it in the future, needless to say. I should be sticking to analyzing the handful of companies I understand, writing about mental models and intelligent investing, and commenting on Superinvestors. The Yahoo! post broke that mold.
12. What financial publications do you read?
I enjoy the WSJ every day, Barron’s every week, Fortune, Forbes, SmartMoney. I also read Bloomberg and the Financial Times online, often. I just recently ordered the Economist and I’ll be reading that weekly as well, replacing Forbes and SmartMoney. I’m switching off of Forbes and SmartMoney to get away from reading the same opinions over and over. Forbes is a great magazine, no doubt, but given a limited resource (my time), I think I’m better off reading a broader and better written publication like The Economist. After reading Fortune, Barron’s, the WSJ, the New York Times, you start getting sucked into groupthink, which can be dangerous. The Economist will help broaden my thinking and push it in other directions. For instance, if you stick to those publications, all you’ll currently read about is housing, energy, the election, the falling market. I’d like to stay abreast of all that, but I need more perspective. Buffett has an uncanny ability to filter noise from signal. I’m not nearly as good at doing so, and thus I need to filter out some of that noise out before it even gets to me. Information overload is a real thing if it’s not usable information.
13. What investing blogs do you read?
Besides newspaper run blogs, like DealBook, I read a ton of value investing blogs. In addition to yours, some of my favorites are NoiseFreeInvesting, Valueplays, Controlled Greed, Cheap Stocks, and Reflections on Value Investing, which I also contribute to. My blogroll has the entire list. I find good ideas and enjoyable reading in these blogs. I’m a fan of Going Private as of recent. She is a great writer.
14. What's the best investment book you've read?
If you’re talking about investing how-to’s, it’s The Intelligent Investor. I derive the base of my thinking from that book, no doubt. The Dhando Investor is close as a modern treatise. If we’re talking everything investing related, then it’s easily Buffett: The Making of an American Capitalist. I’ve read that about 6 or 7 times probably, in two years. It goes without saying that Alice Schroeder’s book this fall is going to cause me a few sleepless nights. Regarding The Dhando Investor, that book hit some nerve in my brain. I must’ve read that one 6 or 7 times as well. Buffett and Graham talk a lot about business-like investing, that mantra we’ve all heard. But, it wasn’t until I read Pabrai that I began thinking of investing like an entrepreneur thinks about running a business, which is at the core of my framework now. If Graham is the Old Testament and Buffett is the New Testament, Pabrai is like CCD or Sunday School for me, clarifying some already established concepts. Low risk of capital impairment, uncertain future outcomes; that framework hit me like a ton of bricks.
