Okay, class. Please be seated and listen up. Doug Kass, president of Seabreeze Partners Management, is a highly-regarded investor, and a long-time contributor to Barron’s.
He’s assembled his 50 Laws of Investing based on his experience and is passing them along to investors free of charge.
Read them, consider them, reread them, and apply what makes sense for you into your investing regime.
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by Doug Kass, president of Seabreeze Partners Management, contributor to Barron’s.
“Let us not take ourselves too seriously. None of us has a monopoly on wisdom.”— Queen Elizabeth II.
1. Common sense is not so common.
2. Greed often overcomes common sense.
3. Greed kills.
4. Fear and greed are stronger than long-term resolve.
5. There is no vaccine for being overleveraged.
6. When you combine ignorance and leverage, you usually get some pretty scary results.
7. Operate only in your area of competence.
8. There is always more than one cockroach.
9. Stocks have a gravitational pull higher. Over long periods of time, equities will rise in value.
10. Long investing generates wealth.
11. Short selling protects wealth.
12. Be patient and learn how to sit on your hands.
13. Try to get a little smarter every day and read as much as humanly possible. An investment in knowledge pays the best dividends.
14. Investors sometimes think too little and calculate too much.
15. Security Analysis by Benjamin Graham and David L. Dodd (1934) is the most important book on investing ever published. Read and reread it.
16. History is a great teacher.
17. History rhymes.
18. What we have learned from history is that we haven’t learned from history.
19. Investment wisdom is always 20/20 when seen in the rear-view mirror.
20. Avoid first-level thinking. Embrace second-level thinking.
21. Think for yourself. Those who can make you believe absurdities can make you commit atrocities.
22. In investing, that which is comfortable, especially at the beginning, is most often not exceedingly profitable at the end.
23. Avoid the odor of “group stink.” Mimicking the herd and the crowd’s folly invites mediocrity.
24. The more often a stupidity is repeated, the more it gets the appearance of wisdom.
25. Always have more questions than answers.
26. You must have accounting and finance knowledge, work hard, and be keenly competitive to be a successful investor.
27. The stock market is full of individuals who know the price of everything but the value of nothing.
28. Directional call buying, when consumed as a steady appetite, is a mug’s game and often a path to the poorhouse.
29. Never buy the stock of a company whose CEO loves expensive toys more than your kids.
30. Avoid “the noise.”
31. Reversion to the mean is a strong market influence.
32. On markets and individual equities: When you reach Success Station, get off!
33. Low stock prices are the ally of the rational buyer; high stock prices are the enemy.
34. Being right or wrong is less important than how much you make when you are right and how much you lose when wrong.
35. Too much of a good thing can be wonderful. Look for compelling ideas, and when you have conviction, go ahead and overweight bigly.
36. New paradigms are a rare occurrence.
37. Pride goes before the fall.
38. Consider opposing investment views and cultivate curiosity.
39. Maintain a healthy level of skepticism. You never know when the Cossacks might be approaching.
40. Though doubt is uncomfortable, certainty is ridiculous and sometimes dangerous.
41. When investing and trading, never let your mind dwell on personal problems and always control your emotions.
42. “Rate of change” is the most important statistic in investing.
43. In evaluating the attractiveness of a stock, always consider upside reward versus downside risk and the margin of safety.
44. Don’t stray from your investing and trading methodologies and timeframes.
45. Know what you own.
46. Immediately sell a stock on the announcement or discovery of an accounting irregularity.
47. Always follow the cash (flow).
48. When new ways of earnings are developed, like EBITDA, substitute them with the letters BS.
49. Favour pouring over balance sheets and income statements than spending time on Twitter and r/wallstreetbets.
50. Always pay attention to what David Tepper and Stanley Druckenmiller are thinking and doing. Trade and invest against them at your own risk.
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