Back Home/Smart Money

Got back home yesterday. It is such a long flight. I watched

• Midnight in Paris (pretty good)
• Margin Call (disappointing)
• Amazing Race
• Friday Night Lights

But then I looked at my watch and still had four hours to go. Played a little Word Mole, read my Kindle (current book is 1491), read Smart Money and tried to nap a bit.

Smart Money had a very interesting article titled "The 400% Man". I would encourage everyone to read the attached link. It really shows what is wrong with Wall Street and the people who invest our money. Greenblatt definitely touched upon common themes in TLBTBTM when he argued that the Magic Formula was superior to mutual funds.

The article profiles Allan Meachem, a 34 year old in Utah that runs a fund which is up by 400% over 12 years. How does he do it?

• "He carefully reads company filings and other records."
• "Looks for business with great long term prospects, great management, strong cash flow and defensive moats."
• "Stresses importance of doing nothing. He says if he finds two new ideas per year that is phenomenal"
• "He typically owns between 6 and 12 stocks"
• "The first question he acts on any investment is 'where will it be in a decade'?"

The article comments that other money managers would not take this approach as concentrated portfolios are too volatile. In Margin of Safety, Seth Klarman argues the opposite. If you regularly only buy securities that are truly underpriced, it is less risky and has superior returns. That to me is what Meacham is doing.

Friday was a very flat day for me. The refinery play isn't off to a great start. I will be getting some investable funds at the end of February. I will likely largely sit in cash for a bit and see if I can find the "one or two good ideas". When I look at my portfolio I am interested in increasing holdings in NSU (gold) and STD (if there is a pullback). I think I was early in my sale of STD shares. Besides that more STO and perhaps a position in WY (if it drops back to around $20).