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| 5th July 2008
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“Another place we find ideas is by following M&A news – not necessarily because all the deals are interesting, but because they often signal situations or industries that are in flux and can therefore be mispriced.”- Karen Finerman, Metropolitan Capital Advisors, Value Investor – May 2008 |
| 4th July 2008
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“We’ve learned from hard experience to put more emphasis on higher-quality companies rather than just the cheapest. We look for companies well-positioned versus their competitors and operating in markets that are conducive to sustainable profitability and free cash flow generation. The problem – and therefore the opportunity – is usually that there’s a headwind that has everyone worried. Music to my ears is when something is considered dead money and people say, “It looks okay, but I’ll come back to it later when this or that issue resolves itself.” That to me shouts “look here.”- Jeffrey Schwarz, Metropolitan Capital Advisors, Value Investor – May 2008 |
| 3rd July 2008
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“In volatile, crummy markets like we’ve now been in for almost a year, it’s very important to filter out the noise of the market and focus on the underlying investment. Jeffrey is particularly good at that – stepping back and saying if we liked something at $27 and it’s now at $22 and nothing is different, we should be buying more. It goes against your survival instinct to make yourself more exposed to a terrible market, but that has invariably been the time to plant the seeds for good returns later on.” - Karen Finerman, Metropolitan Capital Advisors, Value Investor – May 2008 |
| 2nd July 2008
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“We like it when expectations are very low and we have a contrarian view on a broader issue impacting the company. Low expectations help limit the downside and can result in prices that leave you paying nothing for the upside if good things happen. As Joel Greenblatt, who is one of my oldest friends, always says, “If you don't lose money, most of the remaining alternatives are good ones!”- Jeffrey Schwarz, Metropolitan Capital Advisors, Value Investor – May 2008 |
| 30th June 2008
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“If you are a value investor, you’re a long-term investor. If you are a long-term investor, you’re not trying to keep up with a benchmark on a short-term basis. To do that, you accept in advance that every now and then you will lag behind, which is another way of saying you will suffer. That’s very hard to accept in advance because, the truth is, human nature shrinks from pain. That’s why not so many people invest this way. But if you believe as strongly as I do that value investing not only makes sense, but that it works, there’s really no credible alternative.”- Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008
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| 28th June 2008
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“Many of our other mistakes fall in the category of getting the three, four or five most important characteristics of the business wrong. We thankfully were not very exposed, but many value investors held too long onto newspaper stocks, not recognizing that the business had fundamentally changed and actually moved to what is likely to be a quasi-permanent decline. Recognizing that before it’s too late can be very difficult, particularly in what has traditionally been a relatively slow-to-change business.”- Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008 |
| 27th June 2008
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“One would be ignoring the potential impact of leverage. I know the effect goes both ways, but say you do a sum-of-the- parts analysis and think the assets of a company are worth $100. If the company has $70 of debt, overstating the asset value by only $10 makes the equity value go from $30 to $20. In the grand scheme of things, being 10% off isn’t that big a mistake, but when there’s heavy leverage, it is.”- Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008 |
| 26th June 2008
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“The discount we require to our estimate of intrinsic value truly varies, depending on our qualitative judgment about the sustainability of the business and the risk involved. Because we’re buying stocks with lousy short-term outlooks, it often happens that things continue to go down after we’ve identified something as a buy. We don’t profess to be able to time the market, but that’s one reason why we very seldom buy full positions right away.”-Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008 |
| 25th June 2008
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“We basically focus on what a somewhat knowledgeable buyer, expecting a reasonable return, would be willing to pay in cash for the entire business. We put a lot of emphasis on comparable transaction and market values, crosschecked against valuation measures like enterprise value to EBIT. We’ll generally only invest when the EV/EBIT multiple is in the range of 8x to 15x – the low end for businesses, using Warren Buffett’s terminology, that might be more “questionable,” while the high end is for businesses that are more “comfortable.” Costco is an example of something we own at the high end, because it’s such a high-quality business.”- Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008 |
| 24th June 2008
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“We don’t use sell-side research because it typically has a six- to twelve-month time horizon, and there’s a big difference in how you look at a business with a five-year time horizon versus looking out less than a year. We don’t do discounted-cash-flow models, which give a false impression of precision about very uncertain future outcomes.” - Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008 |
| 23rd June 2008
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“It’s very common to drown in the details or be attracted to complexity, but what’s most important to me is to know what three, four or five major characteristics of the business really matter. We have a great team of analysts who find the ideas and do the investigative work and I see my job primarily as asking the right questions and focusing the analysis in order to make a decision.”-Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008 |
| 21st June 2008
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“We never buy stocks based on what we think other investors are going to do.”- Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008 |
| 20th June 2008
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“Most of the time the short-term outlook stinks for the companies we end up buying, for company-specific or cyclical reasons. The best opportunities tend to be when the company now facing a lousy short-term outlook was not long before considered a darling of growth investors, and when the problems are now perceived to be more permanent. If you think those problems aren’t really permanent, you can make very attractive investments if you turn out to be right.”-Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008 |
| 19th June 2008
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“When I started out in 1979, both in the U.S. and Europe, there were many Ben Graham-type stocks to uncover after the dismal stock performance of the 1970s. As we grew and markets changed, we’ve moved more to the Buffett approach, but not without trepidation. If one is wrong in judging a company to have a sustainable competitive advantage, the investment results can be disastrous. With the Graham approach, the very large discount to static value minimizes that risk. Overall, I’d like to believe we’ve learned well from both Graham and Buffett and that we own securities that would attract each of them.”- Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008 |
| 18th June 2008
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“For the past 30 years we’ve sort of floated in style between Ben Graham and Warren Buffett. Graham’s approach is static, quantitative and focused on the balance sheet. There’s no attempt to look into the future and judge the more qualitative aspects of the business. He’d love the Japanese net-nets today, for example. Buffett’s major idea was to also look more qualitatively for those few businesses with apparently sustainable competitive advantages, where the odds were fairly high that the business would be as successful ten years from now as it is today. In those situations, one makes money not so much from the elimination of the discount to intrinsic value, but more from the growth in that intrinsic value.” - Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008 |
| 17th June 2008
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“We’re always conservative, but we’re being particularly careful not to build into our intrinsic values an optimistic view of corporate profits over the next year or two and we’re insisting on very low valuations. Whenever Ben Graham was asked what he thought would happen to the economy or to company X’s or Y’s profits, he always used to deadpan, “The future is uncertain.” That’s precisely why there’s a need for a margin of safety in investing, which is more relevant today than ever.” Jean-Marie Eveillard, First Eagle Funds, Value Investor – May 2008 |
| 16th June 2008
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“We try to build a portfolio of businesses with two primary characteristics. The first is that, even in times of stress, the underlying income-producing assets are strong enough to maintain a value floor for the investment. In other words, the company is cheap based on what we can be fairly certain of now. The second characteristic is some change going on that is unrecognized by the market and likely to be very valuable in the out years – a free call option. If we get those two pieces right, the value part of our work should defend the portfolio when times are bad, while the eventual realization of the change should generate extra return when things go right.” - Boykin Curry, Eagle Capital Management, Value Investor - March 2008 |
| 14th June 2008
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“I’m a golfer, and one of the things I love about it is that you can play the same course 20 days in a row and every day will be different. It just rained, or it’s hot, or the wind is blowing from a different direction. You have to adjust all the time for a lot of changing factors, which is also true of investing. People who really love to invest wouldn’t have it any other way.”- Robert Lietzow, Lakeway Capital, Value Investor - February 2008 |
| 13th June 2008
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“The lessons are to never, ever panic sell and to be aggressive when the market is having its “events.”-Robert Lietzow, Lakeway Capital, Value Investor - February 2008 |
| 12th June 2008
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“One lesson learned after enduring a few too many round trips is to take more of an IRR [internal rate of return] focus on when to sell – what is the return potential from today, not “I’m holding this until it reaches my target price of $X.”- Robert Lietzow, Lakeway Capital, Value Investor - February 2008 |
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