Ted Weschler: 500 hours

[adesigar]

I selected 0-50 hours. I usually don't generate my own ideas but look at holdings of other value investors. If I really like something which is in the 0-50hrs, I buy a small amount (under 100 shares) to keep the stock on my radar(initial investing). But to make it a full sized position (10% or higher) I will spend upwards of a few hundred hours over a period of months reading everything I can about the company.  As I learn more, understand more and like it more I become more comfortable with the idea and add more.

[Orange]

I don't believe for a single second that Ted Weschler or anyone else spends 500 hours researching a stock BEFORE investing.

 

http://www.bloomberg.com/news/2012-10-22/weschler-rise-from-grace-leads-to-role-advising-buffett.html

 

Like Buffett, Weschler sought an edge by studying company filings and dozens of other publications. The former hedge-fund manager once told David that he didn’t make an investment unless he had spent 500 hours studying the idea.

 

Lets say Weschler devotes 60 hours a week to researching new investments, which is impossible given how much time he must spend on other facets of his job, and also doesn't account for all the time wasted on researching stocks that he later deems unworthy, or that rises while he's researching them.

 

But regardless. Say he works 50 weeks out of the year.

 

60 (hours a week) X 50 (weeks per year)= 3000 hours a year

3000 (hours a year) / 500 (hours) = 6 new stocks a year.

 

Look at his filings, he invests in more than 6 new stocks a year.

 

He's merely embellishing, big time, in order to impress people.

 

 

[ukvalueinvestment]

If I was Buffett's sidekick I wouldn't feel the need to embellish things to impress people.

 

He said recently on his CNBC appearance that he spent 30 years following the dialysis industry.

 

500 hours sounds fairly reasonable to me. 

 

 

[twacowfca]

If I was Buffett's sidekick I wouldn't feel the need to embellish things to impress people.

 

He said recently on his CNBC appearance that he spent 30 years following the dialysis industry.

 

500 hours sounds fairly reasonable to me.

 

Yes.

 

Without embellishment, 500 hours is way on the low side over time for me when unusual value resides in a business, sometimes by a degree of magnitude for a very interesting company.  :)

[yadayada]

what do you spend most time on then? Because annual reports are usually not that informative. They give a brief business description, alot of numbers and the usual legal crap. You do research? call up customers etc?

[twacowfca]

Good, good. So when I piggy back off his ideas and do an extra 3 hours of research, that is 503 hours into the investment.

 

That right there, is your margin of safety.  ;D

 

Yes! You have made a simple but profound observation. :)

[augustabound]

If I was Buffett's sidekick I wouldn't feel the need to embellish things to impress people.

 

He said recently on his CNBC appearance that he spent 30 years following the dialysis industry.

 

500 hours sounds fairly reasonable to me.

 

Yes.

 

Without embellishment, 500 hours is way on the low side over time for me when unusual value resides in a business, sometimes by a degree of magnitude for a very interesting company.  :)

 

What would a ballpark estimate be for you for an insurance company? And does your industry expertise play into that number if you start a looking at a new company?

 

 

[Mephistopheles]

Thanks for all the replies, everyone.

 

I would think industry analysis, and competitor knowledge matters. Remember Buffett bought Iscar after reading a page and half letter, and meeting with the CEO for like half an hour? I think it is fair to say that he had spent many hours prior to this over the course of his lifetime researching the industry, or suppliers, or customers, or competitors. So by the time he saw the deal he had already done his homework, without even knowing about this company.

 

But then again he did say he got the letter from a "company he never heard of". That wouldn't make much sense if he knew the industry so well.

[twacowfca]

If I was Buffett's sidekick I wouldn't feel the need to embellish things to impress people.

 

He said recently on his CNBC appearance that he spent 30 years following the dialysis industry.

 

500 hours sounds fairly reasonable to me.

 

Yes.

 

Without embellishment, 500 hours is way on the low side over time for me when unusual value resides in a business, sometimes by a degree of magnitude for a very interesting company.  :)

 

What would a ballpark estimate be for you for an insurance company? And does your industry expertise play into that number if you start a looking at a new company?

 

Actually, Some companies don't take a lot of time to understand if one has a good grasp of the  drivers of value, For example, Leucadia. They have a great record of spotting a bargain that gives them a margin of safety.  Their new CEO not only understands this, but has been one of their feeders over the years.  Now that he's running the show, guess who's going to get first pickings of what their investment banking side sniffs out.

 

They've got a young CEO who's been there done that, highly ethical, shareholder focused, plus still guidance from one of the founders.

 

Oh, by the way, they're still selling for about book value.

 

That doesn't take a lot of analysis.  Sometimes lots of extra study might not improve understanding.

 

On the other hand, when I like and own a company, I enjoy following them closely.  :)

 

the extra study does stiffen the backbone to stay with a good company if they hit a rough patch or to decline to flip a company merely because their share price went up

 

The extra study also greatly helps understand when to sell an otherwise good company that is a major position.  For example, several years ago we had a large position in a company that was in Cpt 11 much like  Ted did at the same time with WR Grace.  We sold out some  as it approached fair value and the remainder as it passed fair value when it came out of Cpt 11.  Our edge was the understanding of the company and the industry and the legal environment that  we gained after long study showed that a great company in a cyclical industry was headed for a big recession if not a train wreck.

 

It was ironic that a value investor known for less in depth analysis started buying the stock in a very public way after we had sold out 99% of our position.  I complimented him in a public  public forum for realizing that they were a great company, but pointed out that they were in a cyclical industry.  I left unstated the obvious (to me after long study) fact that they were at the top of the cycle.

 

A year later, we bought that company back during the 2008 crash for 3% of the price of the stock at its peak two years earlier, again because we had gained deep understanding of the company, the industry and the dynamics of ownership and support suggesting they would survive the recession.

 

That confidence to act appropriately in changing circumstances was gained only with long study.  :)

 

A similar deep understanding after long study has guided our very profitable round trips in the Fannie and Freddie preferreds in the last few years. :)

 

 

[Green King]

Thanks for all the replies, everyone.

 

I would think industry analysis, and competitor knowledge matters. Remember Buffett bought Iscar after reading a page and half letter, and meeting with the CEO for like half an hour? I think it is fair to say that he had spent many hours prior to this over the course of his lifetime researching the industry, or suppliers, or customers, or competitors. So by the time he saw the deal he had already done his homework, without even knowing about this company.

 

But then again he did say he got the letter from a "company he never heard of". That wouldn't make much sense if he knew the industry so well.

 

A page from me or you is not the same as a page from CEO of Iscar. The reading of that page will also be different. The key is to know what to look for and that takes a life time of work to get a good understanding.  To know what is important and knowable. Bulk of the time is spent getting a idea of what is going on.

 

Also it takes real understanding to put something so complex in to a page.

 

Kind of relates to the discussion that has been talked about on the board about Munger's one liners. From my experience it takes a lot of work in trying to apply them and think about them through real life cases to get a real understanding or them. Than it takes more time thinking about them to integrate them into you daily thinking and usage. but once that is done it pays big dividend over your life time. (but if you just stop at isn't that a true thing to say and leave it at that than it is the same as not reading them)

[AtlCDore]

If I was Buffett's sidekick I wouldn't feel the need to embellish things to impress people.

 

He said recently on his CNBC appearance that he spent 30 years following the dialysis industry.

 

500 hours sounds fairly reasonable to me.

 

Yes.

 

Without embellishment, 500 hours is way on the low side over time for me when unusual value resides in a business, sometimes by a degree of magnitude for a very interesting company.  :)

 

What would a ballpark estimate be for you for an insurance company? And does your industry expertise play into that number if you start a looking at a new company?

 

Actually, Some companies don't take a lot of time to understand if one has a good grasp of the  drivers of value, For example, Leucadia. They have a great record of spotting a bargain that gives them a margin of safety.  Their new CEO not only understands this, but has been one of their feeders over the years.  Now that he's running the show, guess who's going to get first pickings of what their investment banking side sniffs out.

 

They've got a young CEO who's been there done that, highly ethical, shareholder focused, plus still guidance from one of the founders.

 

Oh, by the way, they're still selling for about book value.

 

That doesn't take a lot of analysis.  Sometimes lots of extra study might not improve understanding.

 

On the other hand, when I like and own a company, I enjoy following them closely.  :)

 

the extra study does stiffen the backbone to stay with a good company if they hit a rough patch or to decline to flip a company merely because their share price went up

 

The extra study also greatly helps understand when to sell an otherwise good company that is a major position.  For example, several years ago we had a large position in a company that was in Cpt 11 much like  Ted did at the same time with WR Grace.  We sold out some  as it approached fair value and the remainder as it passed fair value when it came out of Cpt 11.  Our edge was the understanding of the company and the industry and the legal environment that  we gained after long study showed that a great company in a cyclical industry was headed for a big recession if not a train wreck.

 

It was ironic that a value investor known for less in depth analysis started buying the stock in a very public way after we had sold out 99% of our position.  I complimented him in a public  public forum for realizing that they were a great company, but pointed out that they were in a cyclical industry.  I left unstated the obvious (to me after long study) fact that they were at the top of the cycle.

 

A year later, we bought that company back during the 2008 crash for 3% of the price of the stock at its peak two years earlier, again because we had gained deep understanding of the company, the industry and the dynamics of ownership and support suggesting they would survive the recession.

 

That confidence to act appropriately in changing circumstances was gained only with long study.  :)

 

A similar deep understanding after long study has guided our very profitable round trips in the Fannie and Freddie preferreds in the last few years. :)

 

It sounds like you're a fan of LUK.  Just curious on your list of ideas where does LUK rank? 

 

Thanks

[twacowfca]

If I was Buffett's sidekick I wouldn't feel the need to embellish things to impress people.

 

He said recently on his CNBC appearance that he spent 30 years following the dialysis industry.

 

500 hours sounds fairly reasonable to me.

 

Yes.

 

Without embellishment, 500 hours is way on the low side over time for me when unusual value resides in a business, sometimes by a degree of magnitude for a very interesting company.  :)

 

What would a ballpark estimate be for you for an insurance company? And does your industry expertise play into that number if you start a looking at a new company?

 

Actually, Some companies don't take a lot of time to understand if one has a good grasp of the  drivers of value, For example, Leucadia. They have a great record of spotting a bargain that gives them a margin of safety.  Their new CEO not only understands this, but has been one of their feeders over the years.  Now that he's running the show, guess who's going to get first pickings of what their investment banking side sniffs out.

 

They've got a young CEO who's been there done that, highly ethical, shareholder focused, plus still guidance from one of the founders.

 

Oh, by the way, they're still selling for about book value.

 

That doesn't take a lot of analysis.  Sometimes lots of extra study might not improve understanding.

 

On the other hand, when I like and own a company, I enjoy following them closely.  :)

 

the extra study does stiffen the backbone to stay with a good company if they hit a rough patch or to decline to flip a company merely because their share price went up

 

The extra study also greatly helps understand when to sell an otherwise good company that is a major position.  For example, several years ago we had a large position in a company that was in Cpt 11 much like  Ted did at the same time with WR Grace.  We sold out some  as it approached fair value and the remainder as it passed fair value when it came out of Cpt 11.  Our edge was the understanding of the company and the industry and the legal environment that  we gained after long study showed that a great company in a cyclical industry was headed for a big recession if not a train wreck.

 

It was ironic that a value investor known for less in depth analysis started buying the stock in a very public way after we had sold out 99% of our position.  I complimented him in a public  public forum for realizing that they were a great company, but pointed out that they were in a cyclical industry.  I left unstated the obvious (to me after long study) fact that they were at the top of the cycle.

 

A year later, we bought that company back during the 2008 crash for 3% of the price of the stock at its peak two years earlier, again because we had gained deep understanding of the company, the industry and the dynamics of ownership and support suggesting they would survive the recession.

 

That confidence to act appropriately in changing circumstances was gained only with long study.  :)

 

A similar deep understanding after long study has guided our very profitable round trips in the Fannie and Freddie preferreds in the last few years. :)

 

It sounds like you're a fan of LUK.  Just curious on your list of ideas where does LUK rank? 

 

 

 

Thanks

 

 

It's our #4 holding now, and that's about where it ranks. However, they should shine if the market rolls over, and they should be able to put their cash to work as bargains appear in various asset classes.