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The Science of Hitting
The Science of Hitting
Articles (524) 

Focus on the Movie, Not the Snapshot

Some lessons learned from buying questionable businesses at 'cheap' prices

April 24, 2019 | About:

About the author:

The Science of Hitting
I'm a value investor with a long-term focus. My goal is to make a small number of meaningful decisions a year. In the words of Charlie Munger, my preferred approach is "patience followed by pretty aggressive conduct." I run a concentrated portfolio - a handful of equities account for the majority of its value. In the eyes of a businessman, I believe this is sufficient diversification.

Rating: 5.0/5 (8 votes)

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dunyuliu
Dunyuliu - 3 weeks ago    Report SPAM
Hi Science,

Thanks for sharing the lesson from Mr. Gayner. It cleared one of my confusions why some used-to-be glorious businesses are so unattractive to me, such as the IBM -- because they face hurdles to reinvest the earnings for future growth. The lesson resonates with my recent reading of <The Warren Buffett (Trades, Portfolio) Portoflio> by Robert Hagstrom. There is a section to discuss growth versus value. As quoted in the book, "The value of a stock, Buffett has explained on several occasions, is the net cash flows of the investment that occur over the life of the investment, discounted at the appropriate interest rate. Growth, he points out, is simply a part of the calculation that pertains to the cash flow. 'In our opinion,' says Buffett, 'the two approaches [value and growth] are joined at the hip.'" I think the growth is the result of properly executed 'ample reinvestment prospects' mentioned by Mr. Gayner. I will pay more attention to the reinvestment prospects in the future and the growth part of the calculation of value. Thanks again!

The Science of Hitting
The Science of Hitting - 3 weeks ago    Report SPAM

Dunyuliu - I'm glad you found the article worthwhile!

hunt1985
Hunt1985 - 2 weeks ago    Report SPAM

good job! glad to join your community !

The Science of Hitting
The Science of Hitting - 2 weeks ago    Report SPAM

Hunt1985 - Glad to have you and nice to meet you!

stephenbaker
Stephenbaker - 2 weeks ago    Report SPAM

Science, when you invested in shares of MCO in 2016, did you anticipate that earnings would rise by 75% in 3 years? Otherwise, what were your expectations? This is the issue in evaluating companies based on movies rather than snapshots. Personally, I'm terrible at guesswork. A series of snapshots is what makes a movie. I'd rather formulate an investment thesis based on a series of snapshots as opposed to a movie that has not yet played out. The snapshots not only make up the movie, they also provide useful trends in helping predict how the rest of the movie unfolds. So to eliminate snapshots is not something I'd subscribe to. Thanks for the article.

The Science of Hitting
The Science of Hitting - 2 weeks ago    Report SPAM

Stephen - No, I was not expecting 75% earnings growth (obviously I didn't anticipate the lower tax rate, as an example). And I think you make a compelling argument. As with most things investing, I'm not really advocating that you go 100% in either direction. The comfort zone for me is probably somewhere in between the snapshot and the movie (kind of like your series of snapshots). Thanks for the thoughtful comment!

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