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February 27, 2015

108-year-old investor: 'I doubled my money in 1929 crash – and I'm still winning'

Three days a week, Irving Kahn takes a taxi from his flat in Manhattan for the short ride to the offices of his investment firm, Kahn Brothers.
Nothing surprising about that, you might think. But Mr Kahn is 108 years old.
His Wall Street career began before the crash of 1929 and over the intervening decades he has seen the Great Depression, the Second World War, the Cold War and the recent financial crash, as well as numerous less-severe crises.
Through them all he carried on investing.
Many professional investors stress the importance of a long-term approach but few are in a position to speak about it with as much authority as Mr Kahn.
So, in an exclusive interview, Telegraph Money asked him to look back over his long career and recount the key events that have influenced his strategy as an investor.
“In my early days, the equities market was dominated by speculators looking for tips,” Mr Kahn said. “The only serious investing was done by a few large institutions that stuck to bonds and shares in well-established companies.”
In the feverish summer of 1929, speculation “had driven up prices to unreasonable levels”, he said. So he decided that the way to make money was to “short-sell” a particular share, meaning he would profit from a fall, not a rise, in the price.

Irving Kahn in the Twenties
“One of my clearest memories is of my first trade, a short sale in a mining company, Magma Copper,” he remembered. “I borrowed money from an in-law who was certain I would lose it but was still kind enough to lend it. He said only a fool would bet against the bull market.” But by the time the Wall Street crash took hold in the autumn, Mr Kahn had nearly doubled his money. “This is a good example of how great enthusiasm in a company or industry is usually a sign of great risk,” he said.
More: The easy way to invest like the gurus
The effects of the Wall Street crash were very different from the aftermath of the recent financial crisis, Mr Kahn said. “The 1929 crash was preceded by a real estate bubble like the recent one, but there were also many differences. Many individuals were leveraged [investing with borrowed money] so portfolios were wiped out.
“There were also no legal protections. We had no securities laws. While everyone knows the system was flawed before the recent crash, at least there were some protections in place. In the Twenties we had nothing. And when the Depression hit, there were bread lines and families homeless in Central Park with nowhere to go.”
But after Mr Kahn’s early success in the risky business of short-selling, his approach changed to one of finding solid companies that were undervalued by the stock market and then holding on to them. He also turned his back on borrowing money to invest (leverage). “I invested conservatively and tried to avoid leverage. Living a modest lifestyle didn’t hurt, either,” he said.
The catalyst for the change was his collaboration with Benjamin Graham, the inventor of “value investing”.
Mr Kahn said: “In the Thirties Ben Graham and others developed security analysis and the concept of value investing, which has been the focus of my life ever since. Value investing was the blueprint for analytical investing, as opposed to speculation.”
Graham was a lecturer at Columbia University in New York, where his pupils included Warren Buffett, and Mr Kahn was his teaching assistant. “They’d take the subway to Columbia together,” said Tom Kahn, Irving Kahn’s son, who also works for the family investment firm.
>> How to invest like ... Benjamin Graham
As a value investor Ben Graham believed in trying to calculate the true value of a company and then buying the shares only if the price was substantially lower.

Irving Kahn today
Irving Kahn said: “During the Great Depression, I could find stocks trading at tremendous discounts. I learnt from Ben Graham that one could study financial statements to find stocks that were a 'dollar selling for 50 cents’. He called this the 'margin of safety’ and it’s still the most important concept related to risk.”
Indeed, he uses the same approach today. “During the recent crash and in other sell-offs, Tom and I looked for good companies selling at a discount, which do surface if you’re patient. If the market is overpriced, an investor must be willing to wait.”
He added: “There are always good companies that are overpriced. A disciplined investor avoids them. As Warren Buffett has correctly said, a good investor has the opposite temperament to that prevailing in the market. Throughout all the crashes, sticking to value investing helped me to preserve and grow my capital.
“Investors must remember that their first job is to preserve their capital. After they’ve dealt with that, they can approach the second job, seeking a return on that capital.”
The market today
Mr Kahn said he was finding few bargains in today’s markets, in which America’s benchmark S&P 500 index has hit repeated record highs.
“I try not to pontificate about the market, but I can say that my son and I find very few instances of value when we look at the market today. That is usually a sign of widespread speculation,” he said.
“But no one knows when the tide will turn. Those who are leveraged, trade short-term and have bought at a high prices will be exposed to permanent loss of capital. I prefer to be slow and steady. I study companies and think about what they might return over, say, four or five years. If a stock goes down, I have time to weather the storm, maybe buy more at the lower price. If my arguments for the investment haven’t changed, then I should like the stock even more when it goes down.”
He explained how investment decisions are reached at Kahn Brothers. “Tom runs the firm and my grandson Andrew is one of our analysts. The three of us and our team enjoy debating the merits of companies. Sometimes we have different opinions, which makes it interesting.
“We basically look for value where others have missed it. Our ideas have to be different from the prevailing views of the market. When investors flee, we look for reasonable purchases that will be fruitful over many years. Our goal has always been to seek reasonable returns over a very long period of time. I don’t know why anyone would look at a short time horizon. In my life, I invested over decades. Looking for short-term gains doesn’t aid this process.”
– The 10 cheapest 'value' stocks to buy today
– The 10 cheapest 'value' stocks on Aim
More stories like this: like us at facebook.com/telegraphinvesting
Advice for investors who go it alone
Mr Kahn said: “I would recommend that private investors tune out the prevailing views they hear on the radio, television and the internet. They are not helpful. People say 'buy low, sell high’, but you cannot do this if you are following the herd.
“You must have the discipline and temperament to resist your impulses. Human beings have precisely the wrong instincts when it comes to the markets. If you recognise this, you can resist the urge to buy into a rally and sell into a decline. It’s also helpful to remember the power of compounding. You don’t need to stretch for returns to grow your capital over the course of your life.”
Tom Kahn added: “Wall Street is a tricky place – with the internet everyone knows everything. But my father has always been extremely analytical. He would come home with a bunch of annual reports and read them at the dinner table.
“But he would start at the back, where you tend to get the key financial information.”
Asked the secret of his father’s longevity, he said: “I think it’s 75pc genetic. He didn’t have a good diet; he used to prefer cheeseburgers to salad and ate lots of meat. And he smoked until he was about 50.”

February 26, 2015

The First Million

Getting Started is hard work. Warren Buffett’s right hand man, Charlie Munger is quoted, “The first $100,000 is a bitch”. Warren Buffett made his first $100,000 in the early 1950’s when he was still an individual investor, compounding his capital 50% annually over several years. $100,000 in 1950 is equivalent to about $1 million today. So perhaps Munger’s 2015 version would be, “The first $1 million is a bitch”.
In 1948, Ben Graham through his company Graham-Newman Corporation bought 50% of GEICO for $712,000. By 1972, this investment was worth $400 million, a 562 bagger. The gain in GEICO would contribute more profit to Graham’s partnership than all the gains from all other investments combined. The irony is that Graham rarely invested more than 5% of the firm’s capital in one company, but with GEICO he invested 20% of the firms capital. Graham’s most successful investment ever came when he broke his rules and made an educated concentrated bet.
Warren Buffett, age 20, was introduced to GEICO in 1950 when he was Graham’s student at Columbia Business School. Buffett would soon travel to GEICO head quarters to conduct due diligence on the company. He would talk for hours with Lorimer Davidson (would later become CEO) and gain valuable insight into the business. Less than two days after the meeting with Davidson, Buffett would put 75% of his net worth into GEICO. About two years later he would sell GEICO for a 50% gain. [side note: Buffett would later join GEICO’s board of directors even though he didn’t own the stock. This would change in the 1970’s when he would start buying shares, adding through two decades, and finally in 1995 buying the remaining 49% of GEICO he didn’t own for $2.3 billion.]
Throughout his early 20’s, Buffett would continue allocating capital to only his highest conviction investments. In some cases this meant placing big bets on one, two, or three companies in particular. When reading Warren Buffett’s comments during this time period, he often used phrases like, “I bought as much as I could”. You don’t hear him using phrases like, “I was worried about owning too much”. From 1949 to 1954, he would average ~50% annual returns, growing his capital 10x breaking the $100,000 mark, equivalent to $1 million today.
“If I was running $1 million today, or $10 million for that matter, I’d be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.”– Warren Buffett
I talk to a lot of highly intelligent investors and some are just getting started with $2,000 – $5,000 – $20,000. The road to $1 million might seem impossible like it’s ascending straight up Mt. Everest. It is not. All you need to do is find and buy a couple great companies early and you will get there. I think fellow MicroCapClub Member Tom Klein said it best when he tweeted:
MillionTweet
Now we aren’t going to start comparing ourselves to Warren Buffett, but what we can do is analyze how he grew his initial capital from $10,000 to $100,000 in his early twenties. Even Buffett didn’t have it all figured out when he was getting started, and his investment philosophy would evolve over time. When I was managing $25,000 my approach wasn’t nearly as disciplined as it is now. Now unlike Warren I was human and took a few big losses during my early capital building years. Most people reading this will also experience your fair share of loss along the way. It will test your psyche, emotions, and discipline, but there is no greater educator than loss. You will learn by losing and then you will prosper.
Warren Buffett’s greatest asset was (and is) his ability to focus. In his early years he wanted to grow his capital as quickly as possible. He didn’t do that by investing in ten good companies. He did it by finding one, two, three great opportunities and buying as much as he could. He didn’t have position sizing rules. The more he liked something, the more he owned. Even Graham broke his own rules and bellied up to the bar when he saw a great opportunity in GEICO. When I was building my capital base from $10,000 to $100,000 to $500,000 I was at most in three positions. I found the best investments I could find and bought as much as I could. If you want to build capital quickly, only invest in your best ideas. Life is Too Short To Diversify.
When Buffett was in his early 20’s building his capital base to $100,000 he conducted great due diligence, visited companies, and spoke to management. Most wouldn’t be surprised by the first one, but many would be surprised that he went as far as visiting companies and speaking to management. Even though he was investing small amounts he took the initiative to meet management. Your edge is knowing your investments better than most. To know your investments better than most you have to do what most don’t. Most of your competitors for great investments do not talk to management. Talk to management.
Now I’d like to add a couple more important things ……
If you want to grow your capital quickly you need to find companies that can be multi-baggers. You need to find stocks that can get big. Most investors assume this means taking on more risk. This isn’t the case at all; in fact I would say this is less risky then most value investing strategies. It is just harder to find such companies. You want to find and buy undervalued companies that will get very overvalued. Through the years I’ve found when you find these elements in one stock, it’s a good formula for success:
  • Revenue Growth 20%+
  • Consistent Revenue Growth
  • EBITDA Growth 40%+
  • Profitable
  • Ability to fund growth with internal cash flows
  • No institutional ownership
  • No analyst coverage
  • Illiquid
  • Operates in an emerging consumer trend
  • Trades at a deep discount to comparable companies
When you find companies with all of these attributes being led by quality management, it’s usually only a matter of time until institutions start to own them, driving the stock prices up significantly. To be a successful investor, you don’t want to invest where the institutions are, you want to invest where they are going to go.
Extraordinary returns follow extraordinary discipline. Discipline in buying and selling, and maybe the most important one of all, Holding. Don’t bother finding the next multi-bagger if you aren’t going to develop the conviction to hold it. Ben Graham didn’t achieve a 500+ bagger in GEICO because he bought his position in 1948. He achieved a 500+ bagger because he held his position. When you find great companies, develop The Conviction to Hold.
There is no reason you can’t turn $10,000 into $1 million in ten years or less regardless of the macro economy. Learn from Warren Buffett and from others on how they turned small amounts of capital into wealth. Don’t listen to those that have never done it. Never seek advice from people that haven’t done what you are about to do. To do great things you can’t think like everyone else. The first million is a bitch, but you will get there.
MicroCapClub is an exclusive forum for experienced microcap investors focused on microcap companies (sub $300m market cap). MicroCapClub was created to be a platform for experienced microcap investors to share and discuss stock ideas. Our goal at MicroCapClub.com is quality membership, quality stocks, and quality content.  If you are an experienced microcap investor, feel free to Apply today.

Taken from

http://microcapclub.com/2015/01/the-first-million/

Interesting articles:

Interesting articles:

Professor Bakshi’s lecture on Relaxo (along with the lecture on paying up) was a superb article which helped us in adding another tool as to how one should try and evaluate a company for a long term perspective. 

We never used to think like this before these articles.
Ian Cassel’s posts on Conviction to Hold and Averaging Up are also very good reads.

Do go through Charlie Munger’s AGM Notes, where Munger is (as usual) at his best.


We also recommend our readers to watch these movies:
Other People’s Money Jiro Dreams of Shushi

Taken from a random blogger online

Another discussion forum on stocks i came across

http://play.fully-faltoo.com/

February 22, 2015

Learn online cloud charts.Turn on to page 52-53

 
 What comes to your
mind on hearing
“Ichimoku Kinko
Hyo” for the first
time? Well, if you say that you feel
like being instructed by a sensei in a
karate class, we can’t blame you for
the faux pas. However, you can still
use Ichimoku Kinko Hyo as a
formidable tool in your arsenal in
your fight against the demons of the
stock markets.
Ichimoku Kinko Hyo is in fact a
charting technique developed by a
Tokyo newspaper writer, Goichi
Hosoda in the 1960s. In Japanese,
Ichimoku means “a glance”, Kinko
means “equilibrium” and Hyo means
W
Ichimoku Kinko Hyo or cloud charts is a tool that
uses candlestick charts to forecast price
movements of stocks
Ichimoku Kinko Hyo:
It’s All In The Cloud
“chart.” This basically translates into
“one look equilibrium chart,” which
is why it is also known as Equilibrium
Chart. The chart aims to give you the
supports and resistances, trend
directions, strength of the momentum,
and buy and sell signals all at one
glance at the chart.
Since the chart was developed by a
newspaper writer and not by some
mathematician or statistician, it is
quite simple in its calculation as well
as application. The main feature of
this chart is the formation of clouds,
(we will learn about this in detail as
we go along) and, hence, it is most
commonly known as Ichimoku Cloud
in most charting software.
FORMATION OF THE
ICHIMOKU CHART
The Ichimoku chart consists of 5
main lines. These lines are based on
the averages of highs and lows over a
given period of time.
1. Tenkan-sen (Conversion Line) (9
period high + 9 period low/2)
It is simply the midpoint of the last 9
trading days/periods calculated by
averaging the highest high and the
lowest low for the past 9 periods
(which is almost 2 weeks). Since the
period is small (9 periods),
Tenkan-sen is the fastest and the most
sensitive line and follows the price

Angel broking weekly report

http://web.angelbackoffice.com/Research_ContentManagement/pdf_report/Weekly_210215.pdf
 

How do I dispose of an Indian flag?

Please read through the document - Flag code of India - and refer to Section V of Part III which says:


Cricket season is on.Might be useful for being on the correct side of the law.

"When the Flag is in a damaged or soiled condition, it shall not be cast aside or disrespectfully disposed of but shall be destroyed as a whole in private, preferably by burning or by any other method consistent with the dignity of the Flag."

Page on mahapolice.gov.in

Vande Mataram.

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