Reflections on the Ten Attributes of Great Investors

Accounting is the language of business and you need to understand it to appreciate economic value and to assess competitive positioning. Investors face a slew of psychological challenges. Perhaps the most difficult is updating beliefs when new information arrives. Position sizing and portfolio construction still do not get the attention they warran... See more

The Santa Fe Institute (SFI) was founded in 1984 by a handful of eminent scientists, including a number of  winners of the Nobel Prize, who believed that many of the most vexing problems in the world lie at the  intersection of disciplines.

Proper portfolio construction requires specifying a goal (maximize sum for one period or parlayed bets),identifying an opportunity set (lots of small edge or lumpy but large edge), and considering constraints(liquidity, drawdowns, leverage).

9. Position sizing (maximizing the payoff from edge).

the ability of  accounting numbers to represent economic value is severely limited. Next, he emphasized that competitive  strategy analysis and valuation should be joined at the hip. The litmus test of a successful strategy is that it  creates value, and you can’t properly value a company without a thoughtful assessment of its compet... See more

Yet investing is an inherently social exercise. As a result, prices can go from being a source of informationto a source of influence.  Great investors don’t get sucked into the vortex of influence. This requires the trait of not caring what others think of you, which is not natural for humans. Indeed, many successful investors have a skill th... See more

Making money in markets requires having a point of view that is different than what the current pricesuggests. Michael Steinhardt called this a “variant perception.”13 Most investors fail to distinguish betweenfundamentals and expectations. When fundamentals are good they want to buy and when they are poorthey want to sell. But great investors alwa... See more

Thefirst is a fundamental understanding of how a company makes money. The idea is to distill the business tothe basic unit of analysis.  The second dimension is gaining a grasp of a company’s sustainable competitive advantage. A company has a competitive advantage when it earns a return on investment above the opportunity cost of capitaland ea... See more

make a point of reading material you do not necessarily agree with. Find a thoughtful person whoholds a view different than yours, and then read his or her case carefully. This contributes to being activelyopen-minded.