“Nobody is born a great investor,” according to Warren Buffet’s sidekick Charlie Munger. Interestingly, you could probably make the same argument about nearly any discipline, but people clearly do have natural affinities for different activities (acting, swimming, math, etc). For those of us who participated in sports, an outstanding coach can have a dramatic impact on people’s lives for many reasons. Maybe the biggest would be the ability to impart the tough wisdom of learning from ones losses or mistakes.
In every field, making errors is part of the healthy evolution of growing. It certainly is applicable when it comes to investing, probably even more so, because of the opportunity cost of capital. By this I mean, when you have a position in X asset, and it does not perform well, you face the double penalty of the loss of the time value of the money, as well as foregoing a chance to have a better performing asset.
Even further, because of the unpredictable nature of markets, many times a holding can poorly perform for a long time, and then suddenly, in a six month period, massively outperform. Consequently, selling prematurely (after months or years of having paint dry) and missing a big move can lead to lost opportunities which are difficult to get back. If one considers the time horizon in an investment lifetime as anywhere from 30-70 years, these kinds of issues make it even more critical that one is constantly trying to learn from their investment experiences.
One of Ben Franklin’s biggest admirers is Charlie Munger, who clearly took his words to heart, as should the rest of us who aspire to any kind of success, but especially with investing.
The financial world was full of news this week, most of it regarding earnings reports. Disney (NYSE:DIS) beat expectations on the bottom line but missed revenue estimates. Hasbro (NASDAQ:HAS) blew away expectations and some rumors popped about a potential merger with long time rival Mattel (NASDAQ:MAT).
GM (NYSE:GM) produced solid results, but Whole Foods (NASDAQ:WFM) disappointed again, proving the supermarket aisle remains incredibly competitive, as does the car biz. Another fierce landscape is in the dining domain, where Buffalo Wild Wings (NASDAQ:BWLD) served up foul tasting numbers, but Panera Bread (NASDAQ:PNRA) proved their merchandising and technology strategy is serving up tasty results.
On the technology front, iRobot (NASDAQ:IRBT) showed the internet of things area remains robust, while Twilio (NYSE:TWLO), Zillow (NASDAQ:ZG), and Twitter (NYSE:TWTR) proved big markets remain important for young enterprises which need more time to grow into their valuations. Elsewhere, in the merger and acquisition space, Mead Johnson (NYSE:MJN) agreed to be purchased by Reckitt Benckiser (LON:RB) for $16.6 billion biggies, showing recession resistant businesses (if baby formula isn’t what is?) remain incredibly valuable.
Finally, a Federal Judge in Washington D.C. ruled in favor of the Justice Department in the potential $54 billion Anthem (NYSE:ANTM) Cigna (NYSE:CI) merger. Last month, the Aetna-Humana merger was also blocked, but for a measly $37 billion. With the uncertain future of the Affordable Care Act, how this plays out is anyone’s guess.
On the political spectrum, it is never a dull moment in Trumpland. This week it was tweets about Ivanka and Nordstrom's (NYSE:JWN), McCain and the Yemen strike, and the 9th Circuit ruling overturning his executive order on immigration. Next week, Mrs. Yellen will go in front of the Senate to give her semi-annual report on monetary policy. Interestingly, a Federal Reserve Board member announced their retirement, so Donald now has three appointments to add to the distinguished body.
With Yellen up for reappointment in 2018, hard to think she wants to stay around to hang out with the Trump gang. Let’s just hope Donald pays as much attention to tax cuts and North Korea as he does to Nordstrom’s. Of course, that would mean he adopted some of Ben Franklin’s timeless advice.
Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.