Friday, May 05, 2006

Outperformance - some key thoughts

Outperformance in the world of Resolute Growth Fund manager Tom Stanley (there since 1993 inception).

One year return, 91%, five year return 45% p.a., since inception, 26% p.a. Investing principles according to Mr. Stanley:

  1. Be a long-term investor - it's easier to spot long-term trends than quarter-to-quarter movements;
  2. Be flexible - use whatever works at a reasonable price;
  3. Hunt for ideas;
  4. Be skeptical of information sources - try to verify important information from a secondary source;
  5. Buy your best ideas - last year, Resolute held only 14 stocks in it's fund ("we had 14 great ideas - I don't have 150 great ideas, so I'd rather just buy the 14");
  6. Strive for effective rationality - filter out the noise;
  7. Outperform by being different - if you really want to outperform the index, you have to strive to position yourself differently;
  8. Stay humble - humility breeds an open mind that continually seeks good advice and is willing to listen to others (and is thus open to heeding good advice);
  9. Stay in your circle of competence - define it, learn within it, stay in it;
  10. Be a contrarian - some of the best opportunities are found in unloved sectors and stocks;
  11. Be patient - being a contrarian means sometimes underperforming the index, while the long-term trend you've seen fully develops and is more generally realized;
  12. Apply spiritual principles - a daily prayer for wisdom can help you avoid making investment mistakes.


The Confused Capitalist

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