Insights

The author has beaten the market by ~400 basis points per annum over the past three decades running the Fidelity Low-Priced Stock Fund. The book is directed toward investment practitioners with a focus on investment versus speculation. The author’s patient and common-sense approach to investing zeroes in on “what a stock is worth” rather than “what happens next.” The book highlights the benefits of sticking within your circle of competence and investing alongside capable management teams with appropriate levels of financial leverage. He sprinkles in enjoyable and humorous anecdotes to stress the importance of avoiding accounting shenanigans, bypassing commoditized industries or undemocratic countries (e.g. Russia) and the “garbage-in, garbage-out” realities of discounted cash flow valuations. A must-read for serious value investors.

This very readable and well-researched book suggests that U.S. industry has become increasingly concentrated over the past several decades. Since the Chicago School convincingly argued in the 1970s that oppressive antitrust regulation prevented economies of scale for corporations and lower prices for consumers, the U.S. government has consistently allowed historic industry consolidation. The authors cite convincing academic evidence and clear examples (e.g. two companies control 90% of the U.S. beer market and four airlines dominate air traffic) of growing monopolistic behavior weighing on the U.S. economy and income inequality. The authors’ solution is a return to authentic capitalism. As an increasing percentage of profits flow to the most dominant companies, the takeaway for investors is clear. Find and invest in those companies that are insulated from extreme competition.

The authors profile eight diverse investors with concentrated styles and amazing track records. These Hall-of-Fame investors range from professional money managers to math geniuses and industrial executives. The group shares one compelling attribute: an ability to think independently and focus on their 10 to 15 best ideas at any given time.

Famed short seller Jim Chanos remarked that China’s economy was on a “treadmill to hell” back in 2010. Celebrated hedge fund investor George Soros warned that “a hard landing is practically unavoidable” two years later. China has kicked the can down the road since then and added $12 trillion worth of debt to its economy since 2008 (roughly the same size as the U.S. banking system), but the day of reckoning has not yet come. The author explains how one-party rule has led to insolvent banks, zombie companies, and ghost cities. Foreign investors in China should proceed with caution as the Chinese economic miracle must eventually contend with its mountain of debt.

Human judgment and big data combine to transform the Houston Astros from the worst baseball team in a half century to World Series champs in just three years. There are lessons for the investment industry. The combination of statistical analysis AND human judgment can deliver superior performance versus relying solely on big data (quants) or human judgment alone. Commitment to an evidence-based process in the face of adversity is required to achieve the long-term objectives of an investment management firm or a Major League Baseball team.

Ever wondered how Dollar Tree sells everything for just a dollar? So did the three founders when they opened their first dollar store in 1986. Like a great value investor, co-founder and author Macon Brock searched around the world for ‘off-the-beaten-path’ quality merchandise at incredible prices that would surprise and delight Dollar Tree shoppers. The company has maintained the same $1 price point and the best margins in all of retail more than three decades later.

Written by Cal Turner Jr., the former CEO of Dollar General and the son of its founder, the book tells the amazing story of how the Turner family of Scottsville, KY grew Dollar General from its rural Kentucky roots into a national retailer with a $30 B market value. The experiences of Cal Turner Jr., his father, and grandfather provide many useful lessons in business management as they navigated the company through decades of change in the retail industry.

Noted distressed debt investor and author Howard Marks’ investment track record suggests an ability to put the “odds in his favor.” While some on staff hoped for a deeper dive into cycle analysis, Marks chose to keep the material at a high level. Successful investors must recognize how the odds shift as cycles unfold and position portfolios appropriately. Marks urges investors to consider the role of the credit cycle and current valuation levels when determining the “aggressiveness” or “defensiveness” of a portfolio.