Investment Rudder

A rudder is a vertical piece of wood that steers the boat. Small, and largely concealed by water, you will largely go nowhere without it. You don't usually see it, and neither do you hear investors talking about it.

Is it important to have an investment principle?

Graham, Schloss, and Buffett (in the early years) largely lived by the same principles, which is to look for $1 companies priced at 60 cents. The big difference in the early years is that Buffett is so sure of his analysis, that he is willing to dump a large part of his net worth into a single stock.

I think it is necessary to be stubborn as a value investor. When Schloss passed Graham a nice little company to Graham, the latter replied that it isn't the type of company that he is interested in. That nice little company was call Xerox, and they could have term it a growth stock then. Graham remain successful and beat the market by 2 percent or so for 20 over years.

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Of all investors, I aligned myself to Walter Schloss's principles the most.

I am not great at evaluating a business (this is something I need to add to my toolbox), hence, sticking to the balance sheet can be a smart move.

Two of the companies that I missed out during the correction this year were Spartan Motors (NYSE:SPAR) and Midsouth Bancorp (NYSE:MSL). Both got on my radar during their dips, and both have a good balance sheet. Spartan Motors however did not have great earnings.

Both companies went up by almost 80% as of this writing, despite being small companies.

The idea is that earnings are unpredictable, but balance sheet is. I don't find companies that are heavily leveraged, attractive. Unless it is a failing business with many years of negative cashflow, companies usually trade above their book value.

While both Schloss and Buffett do not disclose their holdings (during the early years), each have their own reasons for doing so. Buffett did not want anyone to ride on his coattails, while Schloss has a bunch of companies which many will be afraid to invest in.

For instance, someone like Schloss might be interested in Noble (SGX:N21), but he will diversify his risk.
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I live frugally and have no great lust for the luxuries of life. I do find myself an odd-ball for not knowing the movements of watches, no desire for a nice car, salivate the thoughts of dining at the best restaurants.


One day, I might just become a full time investor, living in a small room in Vietnam (to keep costs down, and I love the food there). There will be

• A shelf with all the books to keep my investment rudder intact.
• Another shelf with all the annual reports of companies I am keen of. 
• A little printer to print these annual reports.
• A bean bag to sit on while reading the reports.
• A small notebook and a fairly large U shaped desk (made of wood of course)
• A modest steel chair.
• A large erasable whiteboard
• A tatami mattress to sleep on
• A space for my cat to live in.

Perhaps. One day when I am old and alone. Perhaps.