What Is the Best Investment That You've Ever Made?

[dpetrescu]

31 minutes ago, KPO said:

Sounds like Berkshire’s MiTek business, which is a good little business. 

Yea exactly - it’s something easy to understand. They make metal connectors for wood framing. That’s it - just keep churning out these things and sell them - in a small market with just a couple or so manufacturers. Very refreshing simplicity in the era of high tech and AI.

[Jaygo]

2 hours ago, dpetrescu said:

Simpson (SSD). It’s pretty much all I talk about on here . So I hate to be a broken record. I use their products in my field so I feel I have a good understanding of it. Its had a good run up and share price is very expensive today. 

I’m in a similar boat. I work in the construction industry and have architectural experience from my early days. SSD is miles ahead of mitek imo. Not in connectors but all the places ssd is going in infrastructure is really amazing. 
 

that said I sold my cost basis last week after 7 years. It’s simply too expensive vs the other adjacent dive looked at recently. 

[KPO]

20 minutes ago, Spekulatius said:

I am a bit out of my depth, but I think SSD is much better run than Berkshires Mitek.

I’m sure that’s right, but my point was the product set overlaps to a large extent and Buffett bought it due to the simplicity and consistency of the business.
 

It probably brings up an inconvenient truth of many businesses inside of Berkshire in terms of them being sub-optimized for profitability (e.g. UP vs BNSF).  I suppose this is upside if Abel is as good as many hope. 

[Spekulatius]

35 minutes ago, KPO said:

I’m sure that’s right, but my point was the product set overlaps to a large extent and Buffett bought it due to the simplicity and consistency of the business.
 

It probably brings up an inconvenient truth of many businesses inside of Berkshire in terms of them being sub-optimized for profitability (e.g. UP vs BNSF).  I suppose this is upside if Abel is as good as many hope. 

I think there is a disadvantage of getting buried deep down in a conglomerate vs being a pure play like SSD.

 

(You Ninja’d my post before deleted it, since it’s redundant with what @Jaygo posted. )

[Sweet]

The cost of membership of this board.

 

I wonder how many baggers of my membership I’ve made in the short period of time I’ve been on the board.

[valueventures]

On 12/10/2023 at 6:08 PM, Viking said:

What Is the Best Investment That You've Ever Made? My choice of life partner. For two key reasons:

1.) she is old school Italian when it comes to spending (very thrifty). It has been very easy for us to live below our means. This allowed us to save significant sums early (we saved one income after we both had graduating from university).
2.) she has always been very supportive of me managing our finances - she has never questioned my choices when it comes to investing. I have been able to compound returns at close to 20% for 20+ years. Having an extremely supportive partner through this journey/process has been pure gold. It has had lots of set backs - but i was always able to keep moving forward because i always have received the right support at home. Investing has always been a blue job. Not a pink. Or purple.

—————-

What Is the Best Investment That You've Ever Made?

 

For me timing matters a lot when answering this question. That is because i am older. A 100% return when i was young (with a small net worth) is very different than a 100% return today (with a much larger net worth). (We also sold our house in mid-2021 and rolled much of the significant proceeds into the stock i mention below.)
 

My best ever investment was loading up on Fairfax in Oct/Nov 2020.

- thesis: i think everyone on this board knows the thesis. Sanjeev pounding the table in Oct 2020 got it back onto my radar.

- holding period: it continues to be my largest holding today.

- position size: i was close to 100% at times (not today).
- return: Fairfax is up more than 200% from its lows in October 2020.

I'm a big fan of your writings on FFH, which have played a big role in me making it a large position. I'm 30 years old and still fairly early in my compounding journey.

 

Curious if you have general tips on what has worked best for you (20% annual compounding!) in terms of philosophy / strategy, types of companies / setups you invest in, portfolio construction (concentration / diversification), etc. I plan to manage 50%+ of my portfolio passively via index funds, but reserve a portion for active management via ideas generated on CoBF, investor fund letters, my own research, etc. Thanks for all the valuable insight you've added here!

[ratiman]

I bought a really crappy and tiny tech distributor that mostly distributed hard drives to system integrators near Atlanta that was run by the son in law of the dead founder. A real prize. I owned too many shares to get out very smoothly until one day half the world's hard drive capacity was knocked out of service by a typhoon and I realized that at least 20% of the inventory was hard drives. I called in to the next conference call (I might have been the only caller) and asked if hard drive prices had doubled. He said they had more than doubled. The next earnings report, earnings were about half the stock price. I sold the morning of the the earnings report when the PE was about 5x and I might have just gotten back to even. It went bust not much later. It was called SED International.

Edited March 24 by ratiman

[Viking]

4 hours ago, valueventures said:

I'm a big fan of your writings on FFH, which have played a big role in me making it a large position. I'm 30 years old and still fairly early in my compounding journey.

 

Curious if you have general tips on what has worked best for you (20% annual compounding!) in terms of philosophy / strategy, types of companies / setups you invest in, portfolio construction (concentration / diversification), etc. I plan to manage 50%+ of my portfolio passively via index funds, but reserve a portion for active management via ideas generated on CoBF, investor fund letters, my own research, etc. Thanks for all the valuable insight you've added here!

 

@valueventures if my writings have helped you then that is great to hear. But make no mistake about it, any success you have experienced from reading my writings actually has very little to do with me. Your success is primarily the result of your investment framework / actions. And the action thing is super important. That would be tip #1.

 

But don’t confuse action with volume. I might make one big decision every couple of years. 

 

Now, of course, there is a lot more involved. But your question is so broad i think it is best answered in pieces.

 

I hope other board members also chime in with their thoughts. 

—————

When i worked at Kraft Foods i was at a company sales convention. The guy running Kraft Canada had just announced his retirement and i was lucky enough to get invited to his send off. He said a few words…. Here is what i remember. Of course i am paraphrasing…
 

“I am not smarter or more talented than most people. So how did i do it (become very successful - personally / professionally)?  Whether you realize it or not, every day the train stops outside your door. You decide every day if you want to get on it or not. The reason i am in the position i am today is because 20 years ago i decided to get on the train. And 20 years later here is where it has taken me.”

 

Most people rarely ever decide to get on the train. Their whole life. Even though it is stopping outside their door every day. They are much too risk averse.
 

Calculated risk taking, with a bias to action, is extremely powerful when done well. Why? You think through all the bad things that can happen - they are usually knowable. And you usually way underestimate the good things. The ‘positive unintended consequences’ can be massive. The risk / reward is way, way more skewed to the upside than people think. 
 

Every big decision i have made in my life has worked out way better than i expected - and i have made a bunch. And much of the upside was unknowable when i made the decision - that is the mind bending part of ‘calculated risk taking.’

 

There is an important investment angle to this as well…
————- 

Now to be a risk taker, first you actually have to think about things. And in my experience this is where most people fall down. Most people don’t think enough about the important stuff. 
 

I remember doing performance reviews with staff. I would have them review themselves on their own. I would prepare their review on my own. And then we would get together and compare notes. Most of my staff disliked this format.
 

Why? I learned over time that most people do not have the ability to jump out of their own skin and evaluate themselves in an unbiased way. And they also don’t actually have a plan when it comes to their career. 

Both of these things are important to being a successful investor.

 

‘Most people are grazing the planet waiting to die.’ I am not sure where i heard/read this. But it has stuck with me over the years. I use it as a self motivator (not to judge the choices of others). There are lots of ways to live your life - and there is no right or wrong way. But the choices we make do have consequences. And most people fail to grasp that doing nothing (grazing) is actually a choice.
 

Sorry, this post just got way off base…

Edited March 24 by Viking

[RichardGibbons]

4 hours ago, Viking said:

I remember doing performance reviews with staff. I would have them review themselves on their own. I would prepare their review on my own. And then we would get together and compare notes. Most of my staff disliked this format.

 

Why? I learned over time that most people do not have the ability to jump out of their own skin and evaluate themselves in an unbiased way. And they also don’t actually have a plan when it comes to their career. 

 

I think you're misunderstanding what's happening here. Your goal for the performance review was likely to evaluate them in an unbiased way and incentivize their future performance. Their goal was likely to use the performance review to improve their personal outcomes.

[valueventures]

17 hours ago, Viking said:

 

@valueventures if my writings have helped you then that is great to hear. But make no mistake about it, any success you have experienced from reading my writings actually has very little to do with me. Your success is primarily the result of your investment framework / actions. And the action thing is super important. That would be tip #1.

 

But don’t confuse action with volume. I might make one big decision every couple of years. 

 

Now, of course, there is a lot more involved. But your question is so broad i think it is best answered in pieces.

 

I hope other board members also chime in with their thoughts. 

—————

When i worked at Kraft Foods i was at a company sales convention. The guy running Kraft Canada had just announced his retirement and i was lucky enough to get invited to his send off. He said a few words…. Here is what i remember. Of course i am paraphrasing…
 

“I am not smarter or more talented than most people. So how did i do it (become very successful - personally / professionally)?  Whether you realize it or not, every day the train stops outside your door. You decide every day if you want to get on it or not. The reason i am in the position i am today is because 20 years ago i decided to get on the train. And 20 years later here is where it has taken me.”

 

Most people rarely ever decide to get on the train. Their whole life. Even though it is stopping outside their door every day. They are much too risk averse.
 

Calculated risk taking, with a bias to action, is extremely powerful when done well. Why? You think through all the bad things that can happen - they are usually knowable. And you usually way underestimate the good things. The ‘positive unintended consequences’ can be massive. The risk / reward is way, way more skewed to the upside than people think. 
 

Every big decision i have made in my life has worked out way better than i expected - and i have made a bunch. And much of the upside was unknowable when i made the decision - that is the mind bending part of ‘calculated risk taking.’

 

There is an important investment angle to this as well…
————- 

Now to be a risk taker, first you actually have to think about things. And in my experience this is where most people fall down. Most people don’t think enough about the important stuff. 
 

I remember doing performance reviews with staff. I would have them review themselves on their own. I would prepare their review on my own. And then we would get together and compare notes. Most of my staff disliked this format.
 

Why? I learned over time that most people do not have the ability to jump out of their own skin and evaluate themselves in an unbiased way. And they also don’t actually have a plan when it comes to their career. 

Both of these things are important to being a successful investor.

 

‘Most people are grazing the planet waiting to die.’ I am not sure where i heard/read this. But it has stuck with me over the years. I use it as a self motivator (not to judge the choices of others). There are lots of ways to live your life - and there is no right or wrong way. But the choices we make do have consequences. And most people fail to grasp that doing nothing (grazing) is actually a choice.
 

Sorry, this post just got way off base…

This is helpful, thank you! Sounds like you've outperformed by being patient, waiting for a fat pitch, and then backing up the truck when the odds were heavily in your favor (rather than investing in a number of small positions and over-diversifying). "Calculated risk-taking", as you mentioned.

 

I appreciate the anecdote and am glad I've "gotten on the train". Hopefully it sets me up similarly well for the future.

[Viking]

9 hours ago, valueventures said:

This is helpful, thank you! Sounds like you've outperformed by being patient, waiting for a fat pitch, and then backing up the truck when the odds were heavily in your favor (rather than investing in a number of small positions and over-diversifying). "Calculated risk-taking", as you mentioned.

 

I appreciate the anecdote and am glad I've "gotten on the train". Hopefully it sets me up similarly well for the future.

@valueventures it should be noted that most of my investments are held in tax free accounts. Not having to think about taxes is a big deal. Simplicity usually leads to better results. 
 

Here are some random thoughts on concentration. Stanley Druckenmiller has some pretty good thoughts on this topic.

 

1.) My first large investment when i was much younger was Bre-X. Went to zero. And it was the best $5,000 that i ever spent. Because it taught me lots of great lessons… one being the extreme danger of concentration.
 

Another lesson was it taught me the difference between speculating and investing. My Bre-X loss was very very painful - i hate to lose money. It motivated/pushed me to read:

- The Warren Buffett Way - Hagstrom

- The Intelligent Investor - Graham

- One Up on Wall Street - Lynch

- A Random Walk Down Wall Street - Malkiel

 

I stole ideas from each of those 4 books and began to stitch together what eventually became my current investing framework - one that fits my psychology/how i am wired. This is critical. And i know it works. This is also critical. To be successful you need both.

 

2.) My sample size is very small (times i was very concentrated). The fact i did not blow up my portfolio is partly due to luck. How much? Impossible to know. Bottom line, the investing gods have been very kind to me. They aren’t always - you can be right and still blow up. Eyes wide open - if you are going to play the game this way.

 

3.) I do believe making concentrated bets can lead to extreme outperformance (of the market averages). My 20 year average return is about 20% per year.
 

Not all of this outperformance is due to concentration. For example, I also pay attention to macro at times - this has worked out very well for me over the years but is likely a terrible idea for most people. As a stated earlier, most of my investments are in tax free accounts so i can easily make changes.

 

4.) I only concentrate in positions i think i understand extremely well - and where i think i have an angle/perspective that is materially different than Mr. Market. So i tend to fish in a very small pond (as people can see from my posts). Patience is important.

 

Fairfax was a big position for me in 2003. And again from 2006-2009. And again in late 2020. 
 

Of interest, i was building a large position in Fairfax in late 2019. I thought things were getting better way back then - and the stock looked cheap. But i reversed course and went 100% cash in Feb of 2020 as Covid was rampaging its way across the globe and towards North America. I remember the day i sold everything. I was skiing with my son and a couple of his buddies at Cypress mountain in Vancouver. After a couple of runs in i told my son i needed to go into the lodge. It was clear/obvious to me that Covid was going to wreck financial markets. I sold every stock i owned that day. If i was right? I would miss the big downdraft. If i was wrong? I would miss a small gain - stocks hadn’t sold off yet. The risk/reward set-up for stocks was completely wrong (in my estimation). My son and i talked about it on the drive down the mountain - we both remember the conversation like it was yesterday (his buddies were passed out in the back of the van). I was lucky. Covid crushed stocks like Fairfax - in fact, Fairfax was still way down as late as October of 2020. Thankfully, Sanjeev was pounding the table and he got my attention (I started buying Fairfax again). When the Covid vaccine got announced in November of 2020 i got aggressive with my Fairfax position/research. 

5.) I don’t like to be concentrated for extended periods of time. As a result, I was often too quick to take profits - although that likely saved me with Fairfax a couple of times. That cost me with Apple when i sold way too early (I exited right around the time Buffett started to buy).

 

6.) Really, really good ideas (needle-moving) only come along about once every 5 years or so - at least for me. I do invest in lots of other things - the collective returns on these ideas probably track whatever the market averages are doing. Which is making me question why bother? Why not put this part of my portfolio into index funds?
 

7.) I wonder if my being drawn to concentration as a strategy is not a psychological flaw - where i am simply looking for a quick way to building wealth. Concentration is also very easy. Am i just looking for something that is easy to do?
 

8.) as i move from wealth accumulation to wealth preservation my plan is to concentrate much less than in the past - use broad based index funds more. Today index funds are 30% of my total portfolio - i have already started down this path and i love it (so far). My plan is to get this over 60% in the next couple of years. 

Edited March 25 by Viking

[MungerWunger]

Constellation Software shares which I first purchased on January 2, 2019 at $ 862 per share and have continually added to since (currently 33% of my portfolio) . 

Special shoutout to @Liberty whom I have been following from afar for years now

Edited March 25 by MungerWunger

[gfp]

5 minutes ago, charlieruane said:

 

Just re-upping this because Tech Data was discussed at length during today's annual meeting! Fun to hear details on this obscure almost-deal, which seems to have originated with Greg. 

 

It was kind of a funny story because Warren was suggesting TechData really would have preferred to not be sold to Apollo.  So Bank of America called Todd Combs, Todd told Warren, Warren read the reports and sent Greg to go meet with TechData and they made their topping offer.  Apollo got it anyway..

https://www.wsj.com/articles/berkshire-is-thwarted-in-its-bid-for-tech-data-11575052756

[charlieruane]

Just now, gfp said:

 

It was kind of a funny story because Warren was suggesting TechData really would have preferred to not be sold to Apollo.  So Bank of America called Todd Combs, Todd told Warren, Warren read the reports and sent Greg to go meet with TechData and they made their topping offer.  Apollo got it anyway..

https://www.wsj.com/articles/berkshire-is-thwarted-in-its-bid-for-tech-data-11575052756

Yes—that's right. BofA made the initial outreach to Todd, Greg was dispatched to execute. 

 

Apollo is inevitable, I guess.