Insights

Neil Howe's The Fourth Turning is Here offers a timely analysis of generational cycles as we approach a crucial presidential election. The book argues that we're in a crisis period, or "Fourth Turning," which began around 2008 and may climax in the late 2020s or early 2030s. Howe predicts significant societal shifts, including economic revival, increased civic engagement, and technological advancements. While we approach macro predictions cautiously as value investors, Howe's framework provides valuable context for considering long-term societal trends that could impact markets and industries. As we navigate this period of uncertainty, the key takeaway for investors is the importance of adaptability and identifying companies with strong fundamentals that can thrive in an evolving landscape.

We found Prasad's What I Learned About Investing from Darwin to be an intriguing exploration of how evolutionary principles can inform investment strategies. The author skillfully draws parallels between natural selection and market dynamics, offering fresh perspectives on portfolio diversification and risk management. Prasad's insights on adapting to changing market environments and the importance of patience in long-term investing are particularly compelling. While the book's premise might seem unconventional, we believe it provides valuable food for thought for investors seeking to enhance their decision-making processes and develop a more robust investment approach.

One of our favorite investors, Chuck Akre, has recommended the book 100 to 1 in the Stock Market by Thomas Phelps, which we read and enjoyed. Christopher Mayer, the author, has dedicated this book to Phelps and he has done a nice job. As committed value investors, this book may seem a bit far removed from our philosophy. However, we appreciate that there are many “ways to win” in the market and a relatively small number of big winners have driven our results over time as well. Mayer spent upwards of $50,000 in compiling a database of every 100-bagger between 1962 and 2014 and then spent a chapter on each of the key drivers. And they are what you’d expect: smaller companies, great businesses, reasonable starting valuations, led by wonderful operators, plenty of reinvestment opportunities, etc. A great book and the cornerstone of the approach can be summed up with a quote from Charlie Munger, “If a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you’ll end up with a fine result.”

The recently deceased Nobel Prize winner, Daniel Kahneman, once wrote that overconfidence is “the most significant of the cognitive biases.” Using compelling examples from various fields, the author advises both individuals and organizations to reflect on how to avoid overconfidence and strive to be “less wrong.” From thinking in confidence intervals to considering the average opinion and relying on data, investors and investment firms can likely improve personal and professional performance. Investors should trade less often and sell their losers while organizations should find ways to reward well-intentioned failure. The book may help investors better calibrate their own confidence and help take Voltaire’s words to heart: “Uncertainty is an uncomfortable position, but certainty is an absurd one.”

We have read a lot of books about great investors. This one sticks out as particularly insightful and easy to read. The investors range from the very well known, like Bill Miller and Charlie Munger, to the less well known, like Nick Sleep and Arnold Van Den Berg. The author interviewed these legendary investors on multiple occasions over many years and their subtle wisdom jumps off the pages. The writing flows and is a pleasure to read – we suspect this will become a classic over time.

Gallwey, a tennis pro, encourages his students to embrace and works toward “relaxed concentration.” Rather than obsess over minute technical details, tennis players are probably better served to stop trying so hard, calm their mind, and focus on the play at hand. We think many investors would be well served to read this book, let go of their personal criticisms, and let the market’s opportunities happen as they will.

For those of us that have yet to tackle the very well-regarded From Third World to First: The Singapore Story – 1965-2000, this book may serve as a handy “warm-up.” Yew led a small island-nation in Southeast Asia in 1965 with a very diverse population into one of the economic centers of the world. This book presents his views on topics ranging from China’s ambitions to the United States' superpower status and his preference for following “what works.” Investors should be eager to study an individual that Henry Kissinger described as “a man of unmatched intelligence and judgment.” One of our favorite investors, the late Charlie Munger, clearly appreciated Yew’s teachings as his home contained just two busts; one of Benjamin Franklin and the other of Lee Kuan Yew.

Lower turnover, long-only fundamental equity investors may not appreciate this book. However, as committed “no-averaging-down” investors, we think this book offers something for all investors. The author spends the first half of the book diving into the importance of grit, self-control, and self-discipline. We preferred the second half that detailed the importance of risk controls and money management techniques.