Legendary contrarian value investor John Neff wrote the book "On Investing," and I feel that it’s a must read for every serious investor who wants to have a lasting edge outperforming the market. By the time Neff retired in 1995, each dollar invested back in 1964 when he began his career had returned $56 versus $22 for the S&P 500 (SPY, Financial).
Neff attributed a good portion of his success to his incredible discipline. Throughout his investment career, every Saturday at 1 p.m., Neff made it a requirement that he read every article in the Wall Street Journal's business section from the previous week. I think that this is a valuable lesson to be learned from a legendary investor. This truly shows the importance of discipline and Neff's willingness to learn. Neff's determination, discipline and his thirst for knowledge greatly contributed to his outstanding returns over the course of his 31-year career.
Neff elaborates on the importance of investing in companies that have great leadership and management. In the 1970’s Neff purchased shares of Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) primarily because of his faith in Warren Buffett (Trades, Portfolio), not because of his knowledge of the company. Both legendary investors had a savvy thirst to relentlessly improve their knowledge and wisdom. Philanthropist, author and investor Tai Lopez claims that Buffett, today at age 85, continues to read 800 to 1,000 pages each day, which explains how Buffett has been able to reach Forbes' list as the third richest person in the world with an estimated net worth of $65.9 billion.
There were a few pieces of wisdom that I learned from Neff that I was able to take to the bank.
“It’s not about Hail Mary passes; it’s about grinding out gains quarter after quarter, year after year.”
Neff talks about the importance of having patience when investing while allocating yourself when the opportunity arises. He advises that if you’re trying to make a very fast buck, you should try to develop much riskier investment strategies than the ones that he teaches in his book.
“Although I have enjoyed occasional positive surprises, investors looking to parlay 100 shares of stock into an instant windfall should consider a riskier strategy than mine. Before you plunk your money down in hopes of making a faster buck, remind yourself that you may end up with only a fraction of your grubstake.”
Throughout his book, Neff discusses looking for opportunities to invest in securities that have low PE ratios. Neff talks about how he learned about PE ratios from legendary investors Benjamin Graham and David Dodd. He attributes much of his investment success and investment decisions to being a low PE investor. Neff looked to find companies with low PE ratios in businesses that were easy for him to understand and had what he believed to be a promising future.
“I attribute success not to genius or blinding insights, but to a frugal nature and lessons well learned. Therein rest my enduring principles, stamped indelibly with the merits of low p/e investing.”
This was another quote that I really enjoyed because Neff shows that it is possible to get to the world class investment level if you are an intelligent disciplined investor. I would highly recommend this book to anyone who is serious about increasing their knowledge on investing.
Cheers to your investment success.
