Survival advice from some famous investors

By Dale Roberston, Fund Manager of the MI Chelverton European Select Fund

Every bear market has its own distinguishing features – this time the cause and speed of the falls are, so far, the unique features. Many readers and investors will be in the midst of their first proper bear market and may be shocked and unsettled by the speed and severity of market falls. 

In 2002 when I was on gardening leave, I outsourced the garden to someone better qualified and went to the library where I read the best part of 50 or so investment books, many of them the classics. I took liberal notes and quotes and refer to these often. At times of market stress, it is great comfort to know that it is perfectly common to question everything you hold dear!  As I was flicking through my notes, here are some quotes which hold particular value at the moment.  They illustrate that following time-honoured principles and practices can reap long-term rewards through even the most challenging of times.

The investor should wait for periods of depressed business and market levels to buy representative common stocks, since he is unlikely to be able to acquire them at other times except at prices which the future may cause him regret

Benjamin Graham (1934) – Legendary investor and author of “The Intelligent Investor”

It takes a great deal of discipline to stick to value convictions, especially when the share price declines after you buy them. If you focus only on share price, price declines can be devastating emotionally. For long-term investors who evaluate price relative to business value, price declines can represent tremendous opportunities

Charles Brandes – Founder of Brandes Investment Partners

Only own a stock you’d be comfortable owning if they closed the stock exchange for three years tomorrow

Warren Buffett – The world’s most famous investor and founder of Berkshire Hathawa

Maintain the emotional stability to act diametrically opposite to the masses. It is difficult to part company with the crowd to buy when everyone is bearish but that is precisely what must be done to produce superior returns

Ned Davis – Founder of Ned Davis Research

The best investors are those that can keep their emotional reactions to loss in check

James Montier – Strategist at GMO and author of “Value Investing”

The most extreme and enduring crisis that capitalism had ever experienced…..and the eventual discovery of the severe mental and moral deficiencies for those once thought endowed with genius

JK Galbraith - talking about 1929 in his book “A short history of financial Euphoria”

Interesting to reflect that whereas 3.9m shares were sold yesterday, there were 3.9m shares bought yesterday; and possibly the purchasers may be more intelligent than the sellers

Sir John Templeton – Founder of Templeton, Galbraith & Hansberger

Right now there is a consensus that the strong will get stronger through this recession. This will likely prove accurate. However, one should be wary of paying any price for this strength. When life returns to normal, as it will, valuation normality will also return. This is a time to stick to a strong philosophy which balances a valuation discipline alongside cash flow and balance sheet focus.

Coronavirus may have slammed the brakes on, but we should not see this as a reason to abandon the car! 

Issued by Chelverton Asset Management

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March 2020