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Successful Long-Term Investing:Successful Long-Term Investing: The JourneyThe Journey
October 15, 2011
Presented by:
Mark RobertsonFounder & Managing Partner, Manifest Investing
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
No investment recommendation is intended.
This is an educational demonstration.
The information in this presentation is for educational purposes only and is not intended to be a recommendation to purchase or sell any of the
stocks, mutual funds, or other securities that may be referenced. The securities of companies referenced or featured are for illustrative
purposes only and are not to be considered endorsed or recommended for purchase or sale by Manifest Investing or AAII or NAIC/BI. The
views expressed are those of the instructors, commentators, guests and participants. Investors should conduct their own review and analysis of any company or fund of interest before making an investment decision.
Securities discussed may be held by the instructors in their own personal portfolios or in those of their clients.
Successful Long-Term Investing:Successful Long-Term Investing: The JourneyThe Journey
What are the most powerful lessons learned from multiple
decades of successful long-term investing? Join us as we explore best practices and examine the key success factors based on
working with the most successful investment clubs and individual
investors.
Successful Long-Term Investing:Successful Long-Term Investing: The JourneyThe JourneyMost important factors for Most important factors for
selecting long-term investments selecting long-term investments
Most important components of Most important components of fundamental analysis fundamental analysis
Key aspects of momentum and Key aspects of momentum and sentiment: technical analysissentiment: technical analysis
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
5
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
6
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Rappahannock (2008-Current)
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%R
ate
of
Ret
urn
(IR
R)
Club
S&P 500 Overall annualized
relative return is (+5.4%)
1-Year relative return is +14.4%
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
8
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
11
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
1. Commit. (Invest regularly) Study opportunities carefully.
2. Buy high-quality companies when they’re on sale and Hold ... As long as it makes sense to
do so.
3. Prudently diversify by size & sector and allocate.
Be a diligent owner.
Experienced investors should be willing to explore deep-
value opportunities and engage capital preservation
strategies.
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Growth: Diversify by Small, Medium & Large
Lost Decade
13
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
14
Be patient. Be disciplined. Imagine.
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Do Moats (Quality) Matter?
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
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Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
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Average = -19%
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Establishing Expectations
20
ForecastsForecasts
1. Growth1. Growth
2. Profitability2. Profitability
3. Valuation3. Valuation
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
21
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Big PictureBig PictureTurbulence, Temporary or Terminal?Turbulence, Temporary or Terminal?
Thoughts, Actions?Thoughts, Actions?
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
23
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Gauging Momentum: Relative Strength Index (RSI)
RSI is based on closing prices
www.StockCharts.com
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Few Moments with Desmond & Elder: Sentiment
http://www.ritholtz.com/blog/2011/02/qa-paul-desmond-of-lowrys-part-ii/
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Changing of the Colors: Advent of a Bear Market?
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
27
Where are we “now?” Potential tipping point?
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
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Selling a stock is not un-American. Don’t hold because you’re stubborn
and don’t let the tax tail wag the decision dog, either. Take advantage of selling opportunities when you have
a good reason.
1. You need the money. This one is personal. Your own life circumstances
(college, a vacation, new car, new house, doctor bills, child’s wedding, bail money, church offering plate)
dictate the need. Update your company studies and sell the one that makes the most sense, often the one with
the lowest expected return. Source: “When to Sell: The Challenge of Reason” – Better Investing
(September 2004)
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
29
2. Because fundamentals (quality) are in decline.
Watch changes in management, slowing growth rates, declining profit margins, weird footnotes... and the FBI
and SEC. 3. Because you can make the portfolio
Better!Better!Improve the expected returns. Maintain the quality of the
holdings. Keep the overall sales growth forecast (or dividend yield) strong enough. Prudently diversify.
Don’t be afraid to sell. Portfolios CAN be
improved!
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
1. We’re here for the returns. Build an understanding of and expectations for your
companies.
2. Quality matters. Excellent companies persist and provide protection during bear
markets and corrections.
3. Design and manage portfolios with an emphasis on return forecasts, overall quality and the average growth of the
holdings. Rinse. Repeat.
Build an awareness of the tidal powers of momentum and sentiment. Discover
discipline and practice patience.
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
0%
5%
10%
15%
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
20-year trailing average of ~3% ... Larger sample at 5.3%
Trends/Forecasting …
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
-15%
-10%
-5%
0%
5%
10%
15%
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Housing Price Index (Warren/Troy/Farmington Hills) …
20-year trailing average of ~3% ... Larger sample at 5.3%
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey
Successful Long-Term Investing: The JourneySuccessful Long-Term Investing: The Journey