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Video: Eddie Lampert on Long-term Investing


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So the long and short of it is, an investor has to buy value at a discount.

 

and be a real long term investor i.e. don t say you re a long term investor + then sell out 6 months later because you see something cheaper/better or because company is not making decisions for the short term to get a  pop in the price to the detriment of long term value.

 

I thought the video gave perspective in Mr Lampert's strategy as a true long term investor like WEB not like most hedge fund investors out there.

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Only Larry Summers can sit next to two hugely successful businessmen and pontificate on his experiences in business...of which he has none.  The guy just can't ever say he doesn't know something, even if he clearly doesn't know something. 

 

He's the kind of person who would volunteer for a marine biology panel.  He would just jabber on about how marine biologists have marine biology all wrong, nevermind that he has no experience or background in marine biology.

 

 

 

 

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Don't hold anything at full value, because the margin of safety has vanished.

 

It depends on your style and what kind of companies you are interested in. Someone like Buffett will hold KO at full value, or even above, because to him the margin of safety comes from the moat and the future growth, and because if he sold he might not find a better business to invest in.

 

So what you said definitely applies to cigar butts, but not necessarily to good businesses. IMHO.

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Don't hold anything at full value, because the margin of safety has vanished.

 

It depends on your style and what kind of companies you are interested in. Someone like Buffett will hold KO at full value, or even above, because to him the margin of safety comes from the moat and the future growth, and because if he sold he might not find a better business to invest in.

 

So what you said definitely applies to cigar butts, but not necessarily to good businesses. IMHO.

 

I don't understand how you can describe something as at full value, or even above, yet still having a margin of safety.  We must have a different understanding of what margin of safety is.

 

Many value investors think (and thought at the time) that Buffett should have sold KO more than a decade ago when it was obviously above full value. There were plenty of things better, and there was no logical justification to hold it.

 

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I don't understand how you can describe something as at full value, or even above, yet still having a margin of safety.  We must have a different understanding of what margin of safety is.

 

Many value investors think (and thought at the time) that Buffett should have sold KO more than a decade ago when it was obviously above full value. There were plenty of things better, and there was no logical justification to hold it.

 

Well, back then he did buy Gen Re using stock, so he kind of did benefit from that overvaluation of many of Berkshire's stocks :)

 

I think our difference might be semantics, so I'll reformulate what I said:

 

Sometimes it is possible to look at a business that appears fairly valued on a purely quantitative level, and some people might say that it should be sold, but some investors might see a significant margin of safety remaining in more qualitative attributes (moat, growth potential, management's quality, etc), and so they continue holding it.

 

It is also possible that to some investors certain attributes are worth more than to others, so for example you might not want to sell the safest and most predictable business in the world and replace it with a much less safe and predictable business just because it's X% cheaper; to you, that safety and predictability might be worth a lot more than the difference over the long-term..

 

This is why what is "fairly valued" to one can be "under valued" to someone else. Sorry if I wasn't clear the first time.

 

But this applies more to something close to "fair" value than "insanely overvalued", obviously...

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Many value investors think (and thought at the time) that Buffett should have sold KO more than a decade ago when it was obviously above full value. There were plenty of things better, and there was no logical justification to hold it.

 

And indeed, I believe WB has said that not selling at the time was a mistake.  Even given the capital gains taxes as a result.  Not that he would have been able to unload the whole position anyway.

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I think Lampert has a slightly different investing style than most of us, due to the amount of money he's dealing with.  For most of us, I'm guessing, we both have no control over the companies that we invest in, and it is fairly easy for us to get in and get out of our investments.  If one of our investments becomes fairly valued or overvalued in a short period of time, there's no reason for us not to sell.  I don't think Lampert has that privilege.

 

That's why, I think, he's arguing that for large institutional investors the best strategy is to find a decent company, hopefully at a discount, buy a controlling interest, and then manage it for the long term.  Chances are you'll probably outperform the market better that way than any other way (if you're managing billions of dollars.)

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Only Larry Summers can sit next to two hugely successful businessmen and pontificate on his experiences in business...of which he has none.  The guy just can't ever say he doesn't know something, even if he clearly doesn't know something. 

 

He's the kind of person who would volunteer for a marine biology panel.  He would just jabber on about how marine biologists have marine biology all wrong, nevermind that he has no experience or background in marine biology.

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Must say hearing lampert was really inspiring, he is a lot less sophisticated than I thought in his demeanour, which just confirms my thesis about what it takes to be a successful value investor. Great link thanks a lot for it, this is the reason I joined this board because I always found the best links to videos and historical documents here.

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Must say hearing lampert was really inspiring, he is a lot less sophisticated than I thought in his demeanour,.......

 

Same here, he seems like a guy at the club you'd sit and have a beer with and shoot the shite.

 

It was similar for me with Charlie Munger.  Before I'd heard him speak, I had this sophisticated semi-English, fairly soft voice........kind of like the long time Yankee P.A. announcer in my head.  Then I heard the Buffettesque mid-West way of speaking and I was totally thrown off.  ;D 

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Thanks a lot DollarBills.

 

Parsad, I sincerely believe you should have a section on the board where we can post these interviews. Such a repository of interviews will be incredible. It is something I would want to refer my daughter to in a few years as the combination of these high quality interviews contributed by members of this board will form a wonderful collection.

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Great link to the full discussion.  I think I'd have liked just Eric Schmidt and Eddie Lampert on the panel and less of everyone else.

 

Schmidt's point about incentives is important and maybe overlooked because it seems so obvious.  But, it does really help explain how people make decisions if you know how they'll be rewarded or punished as a result.  Of course, our favorite investor in Omaha makes that point often as well.

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