In mid-September, Cerner Corp. (CERN) was removed from a prestigious list: The Morningstar Wide Moat Focus IndexSM.

The Index is made up of two components. Morningstar describes them this way:

“Companies must have an economic moat rating of wide (meaning we think they have advantages that will fend off competitors for at least 20 years), and their shares must be among those trading at the steepest discount to their fair value estimates in our coverage universe. (Our fair value estimates are determined through independent research by the Morningstar Equity Research

I am frequently asked about whether I prefer return on capital versus return of capital in my investments. My initial answer to this question is usually “it depends”, but my genetic makeup of sloth and indolence generally lead me to favor allowing management to generate return on capital versus making me find great opportunities by the return of capital. As Edgar Bergen (and Warren Buffett (Trades, Portfolio)) so aptly said, “Hard work never killed anyone, but why take the risk”.

Before making any decisions on which return is better for investors, it would be

“Health care is like no other industry. There is seemingly no need for the existence of some functions; you can’t decide whether it’s a profit or not-for-profit system, or whether it’s competitive or not. The regulatory environment is like no other industry. And finally the size and scope of it makes it 25-30 huge industries under one umbrella. It seems to me that the ability to pick a future winner is more an art than science.” – Adam Wallace

An elderly patient was visiting her primary care physician when she told him she was suffering from silent gas.

The second quarter saw some dramatic movement at the end of June as Britain voted to exit the European Union. The reaction to this left the markets down during the quarter.

The Standard & Poor's 500TR was down by (0.38%), the Morningstar Total US Equity Index was down (0.8%), and the Nintai Proxy (70% Vanguard US Equities Total Market Index, 15% Vanguard Global Equities Total Market Index, and 15% cash) was down (1.3%). The Nintai Charitable Trust Portfolio was down (2.1%) net fees. For this year through June 30, the S&P 500TR is up 3.8%, the Morningstar Total US Equity

This was quite a year from both a personal and professional perspective. The biggest change was the dissolution of Nintai Partners and the creation of the Nintai Charitable Trust.

Having fought cancer for five years, I simply don’t have the energy to be on the road 250 days of the year traveling to see clients and answering phone calls at all hours of the night. Also, I have focused on my passion for value investing. Working with the Charitable Trust as well as consulting with Dorfman Value Investments has been a pure joy. I simply couldn’t work with more pleasant

“Don’t ever be deceived about big data and informatics in healthcare. The vast majority of data and informatics are transactional – structured, codified and mechanical in nature. Going forward, nearly all the companies expounding on paradigm shifts, tipping points and cloud-based ecosystems will fail. Never forget healthcare is a business industry. Partially for-profit and partially not-for-profit but an industry nonetheless. And industries will always seek out business solutions rather than theoretical solutions. So far, Big Data and healthcare informatics are mostly theories in search of a problem to solve.”

- David Geoghegan

Nelson Hsu – a fellow contributor here at

This is the first public quarterly report of the Nintai Charitable Trust. The Trust is a legacy portfolio of Nintai Partners that ceased operations earlier in 2015. I personally manage the Trust Portfolio and serve as chief investment officer.

The third quarter saw some dramatic movement leaving the markets down significantly during the quarter. The Standard & Poor's 500TR was down by 6.4%, the Morningstar Total U.S. Equity Index was down 7.5%, and the Nintai Proxy (70% Vanguard U.S. Equities Total Market Index, 15% Vanguard Global Equities Total Market Index, and 15% Cash) was down 8.8%. The Nintai Charitable Trust

***** Please note this article has been amended to reflect additional changes during the market drop of August 24th. During the initial minutes of the market opening, Paychex (PAYX) dropped below our limit order of $41.75 and we took an initial position in the company. In addition, we added to our current holdings of Collectors Universe (CLCT), Computer Modelling Group (CMDXF), and Computer Systems and Programs (CPSI). These transactions are reflected in the portfolio summary at the end of the document. ******

This year was truly a year of change at Nintai. Not only have we closed down our management

We were recently talking to a fellow investment manager and somewhere in the conversation - quite nonchalantly - they mentioned that we weren't really value investors. I laughed at the comment and asked why they thought that was the case. They stated (and I paraphrase here) that essentially we were growth-at-a-reasonable price investors because we didn't invest in true value companies. They went on to say our companies were too successful (measurement wise), had not suffered recent operational or strategic crises, and were too richly valued to be considered truly "value" stocks.

This gave me great pause as I truly

Portfolio results

The markets were relatively flat during the quarter. The S&P 500TR was down by (0.86)%, the Morningstar Total US Equity Index was down (1.20)% and the Nintai Proxy (70% Vanguard US Equities Total Market Index, 15% Vanguard Global Equities Total Market Index, and 15% Cash) was down (0.84)%. The Nintai Portfolio beat the averages gaining 0.55% net all fees. Year-to-date (YTD) the S&P 500TR is up 0.96%, the Morningstar Total US Equity Index is up 0.88%, and the Nintai Proxy is up 1.03%. The Nintai Portfolio is up 8.82% YTD net all fees.

Several stocks drove our performance

We were reading two very interesting articles in the past few days. The first was The Science of Hitting's "Process vs. Outcomes, Revisited " of April 7, 2015 and the second was "False Discoveries in Mutual Fund Performance: Measuring Luck in Estimated Alphas”, by L. Barras, O. Scaillet and R. Wermers[1].

Each of these articles helped provoke thinking around the office that finally settled on one specific question: how long is too long for your investment managers to underperform? This is quite relevant today as many value investors – including Nintai – have underperformed the greater markets

Last week we used Computer Programs and Systems (CPSI) as a company with a “market” moat as well as corporate moat. The day the article was published CPSI issued its fourth-quarter earnings and the stock dropped by 14% in one day. Ramimarciano wrote later that day – quite correctly – that anyone serious enough to listen to me was down a significant amount. And we truly understand where he/she was coming from. Nothing is as frustrating and mortifying than purchasing and recommending a stock and then have it drop significantly on the same day. Talk about humbling. There aren’t enough

Analysis of a “Market Moat”: CPSI

***** EDIT: Since this article was published we added to our position in CPSI by 25% (1000 shares) with an average share price of $47.81. Purchases were made on February 2nd, 2015.***

We were recently reading “Why Moats Matter” by Morningstar’s Heather Brilliant and Elizabeth Collins and began thinking more deeply about how we see moats and their characteristics. Traditionally moats have been seen as individual corporate advantages. In their book, Brilliant and Collins explain Morningstar’s five moat categories as Intangible Assets, Cost Advantage, Switching Cost, Network Effect, and Efficient Scale.

At Nintai we

Here’s a small cap stock flying mostly under the radar but worth examining because it has a history of predictable earnings, a rating of undervalued, and a dividend of 3.90%.

Computer Programs and Systems, Inc. (CPSI) provides medical information technology (IT) systems to small and mid-sized rural and community hospitals. It’s making the most of pressure on hospitals to increase patient care and productivity metrics, as well as the need among hospitals for efficient billing and reporting.

It came to our attention through the Buffett Munger screener at GuruFocus. Getting through the screener requires that a company have

The Search for Compounding Machines on GuruFocus

**EDIT: On December 10th, 2014 Nintai established a LONG position in CPSI. At the time of writing this article Nintai had no position in the company.**

Many readers of GuruFocus have asked us over the past few weeks how Nintai goes about finding candidates for our investment portfolio. We believe we live in an extraordinary time when such resources like GuruFocus are available to us. The ability to obtain, read, and compare 10-Qs at the click of a mouse, visit a company's website or read feedback from a company's customer base - all

I am a better investor because I am a businessman and a better businessman because I am an investor.

Know who said that?

[url=http://www.gurufocus.com/StockBuy.php?GuruName=Warren+Buffett]Warren Buffett[/url] ([url=http://www.gurufocus.com/StockBuy.php?GuruName=Warren+Buffett]Trades[/url], [url=http://www.gurufocus.com/holdings.php?GuruName=Warren+Buffett]Portfolio[/url]).

Accounting is the language of business. If you want to improve your investing skills, it all starts with accounting.

But accounting is simply the alphabet of the language.

The misconception is that just because you know accounting, you’re going to be good at investing.

Wrong.

Download the PDF of this article

Being able to interpret what the accounting numbers tell you and seeing how certain