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Geoff Gannon December 8, 2010

What Jobs Prepare You for Running a Value Fund? – Geoff’s Advice to a College Senior

A reader sent me this email:

I am currently a senior in college and well underway with my job search. I have, since grade school, been devoted to the works of those prominent within value investing…Since about the same time I have managed a personal portfolio geared toward their ideas. Ideally, I see myself within the next ten years starting a value-oriented hedge fund. The issue that I have been pressed with lately is what type of job to get now, knowing… managing people’s money through a fund is eventually what I want to be doing…do you have any perspective or advice in terms of the types of jobs that would better prepare me for eventually running my own fund?

It’s hard to know what experience will be worthwhile.

Graham started as a bond salesman. He was a terrible salesman. But he learned Lawrence Chamberlain’s bond book. You can read Graham’s early writings and see that all Graham really did was apply the ideas of bond investing to common stock investing. That was revolutionary. If Graham had learned stock investing the way it was practiced in his day, would he have taken the same revolutionary approach?

Probably not.

Peter Lynch was an analyst. That probably taught him how to run a fund his way. Lynch was big on meeting with management and finding the exact moment when a company’s fortunes were turning. That’s analyst stuff.

Charlie Munger was a lawyer. Michael Burry was a doctor. What does this tell us? Nothing really. The important thing is that at some point you get completely and totally focused on investing. What you did professionally – even if it was in finance – is often very secondary. It might be meaningless. A lot of investors learned more in their off hours than at their job.

But can you combine learning investing and a career?

You can certainly try.

Here’s how…

Find people you respect. Phil Fisher was not a value guy. Warren Buffett had a lot of respect for him. Try to work for someplace you think does what they do well.

My other advice is to choose someplace smaller and younger.

You can always go to a bigger place later. If you have a choice, pick someplace where they might actually let you do something. Go someplace where there’s more work than workers.

And then just stay in touch with all the value people you meet. Don’t just send me one email. Keep emailing me whenever you have an idea.

Write down the names of any bloggers, analysts, reporters, fund managers, anyone you come across that you respect. You like an insight of theirs or whatever. Write the name down and keep the name. Contact them. If you can make it about a specific stock and tell them something they don’t know, they’ll listen. Keep talking. Do the maximum amount of socially acceptable conversing about stocks.

Make it a rule to never say “no”. If someone asks you to do anything …

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Geoff Gannon December 7, 2010

Tim Welland: 4 Great Investing Articles For You – From a Seeking Alpha Contributor

In an earlier post I said: “Feel free to send me anything you write. I’ll give you my thoughts. If it’s good – I’d be happy to share it on the blog.”

Well, Tim Welland – a contributor at Seeking Alpha – sent me 4 things he wrote. They’re all very good. So – like I said – I’m sharing them on the blog.

Obviously, you’re most interested in reading the articles to learn about the stocks Tim analyzes: Aerosonic (AIM)Hallwood (HWG)AmSurg (AMSG), and Air T (AIRT).

Should I buy? Should I sell? All that stuff.

Then go ahead and read them now:

Aerosonic: Rough Past, Bright Future

Hallwood Group: Compelling Valuation but Dangers Lurk

AmSurg: A Healing Investment

Why I’m Not Buying Air T (Right Now)

But for anyone reading this blog who happens to write their own investing blog – or is thinking about it – Tim’s articles are really good examples of really good investment writing. A lot of the stuff at Seeking Alpha – and elsewhere – is pretty weak. Very superficial.

I’ve been writing about Barnes & Noble (BKS) lately. You’re probably sick of hearing about it. Maybe you disagree with me. That’s fine. I don’t mind people disagreeing with me.

I do – however – mind a lot of the coverage of the Barnes & Noble story. When you’re doing investment writing you can’t just write from the top of your head. You can’t give us the same stuff everybody else gives us. You can’t say “my read of the market is…” without maybe, you know, citing some facts or figures. Or at least giving us a new line of analysis. Give us a new question to ask. A new stock to dig into. Give us something we can use.

Tim does that.

Each of these 4 articles is really, really good. And I’m not saying that because Tim was nice enough to read my blog and send me his articles. I’m saying it because part of what I do all day is read investment writing. And most of it is bad. Most of it is worse than bad. It’s financial furniture polish.

Honestly, I think we need more investment writing. And if you’re reading this blog and not doing some of your own writing, please consider it. We need you.

If you’re a terrible writer, I absolve you in advance. I’ve read investment articles by some pretty awful writers and I’ve enjoyed doing it. And I’ve read some investment articles by some pretty good writers and I’ve hated doing it.

So what is good investment writing?

Investment writing is thinking aloud.

All you have to do is write the way you think. Not the way writers write. Not the way you talk in real life. Just lay out your thoughts on the page. That’s it.

The tough part is the prep work.

More time goes into getting ready to write an investment article than the …

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Geoff Gannon December 6, 2010

Bill Ackman Tells Borders (BGP) to Bid $16 a Share for Barnes & Noble (BKS)

Just wrote an article for GuruFocus, so you may want to read that first.

Bill Ackman – the hedge fund manager who runs Pershing Square – just filed a 13D with the SEC saying he wants Borders (BGP) to buy Barnes & Noble (BKS) for $16 a share. Ackman would provide the cash. Borders itself could never pull off this kind of deal. They are in much worse shape than Barnes & Noble.

These are the two biggest booksellers in the U.S. The third place player – Books-a-Million (BAMM) – is a very distant third. There are a couple interesting angles to this story. Obviously, as a Barnes & Noble shareholder I tend to focus on that side. Barnes & Noble is auctioning itself off right now. And Ackman’s offer will let us see if there are any other bidders. It will certainly encourage Riggio and Burkle to get off the fence.

If it looks like such a combination really was going to happen, it would also mean some soul searching for companies like Bertelsmann. Do we really want a single customer that big? Do we really want only two real retail paths – Barnes & Noble and Amazon – to our readers. And, of course, those two paths would be both print and digital.

I think we can say that if Borders merged with Barnes & Noble the idea of any serious e-reader other than Kindle and Nook is dead. I’m talking from the publisher’s perspective here. I’m sure we’ll see other devices. But as a realistic distribution system, it would only be Amazon and Barnes & Noble. It’s a scale business. And you need both the content and the relationship with the reader. I’m sure other folks will engineer e-readers of exquisite technical excellence. It won’t matter.

I have a gold coffee filter at home. I put a paper filter in it. Gold is pretty. Paper does the job I ask.

Anyway, this has me thinking about the likely and immediate scenarios and the less likely more long-term scenarios. Obviously, actually consummating a marriage between Borders and Barnes & Noble for $16 a share in cash is an unlikely and distant scenario. The immediate issues are the reactions from others at Borders and the reaction from Barnes & Noble. Barnes & Noble is tenuously controlled by Riggio – he had a narrow majority of the September vote and since then the stock price has gone down with a lot of Nook spending and little news on the buyout front.

There was also a report in the New York Post that Riggio wasn’t very interested in buying the whole company. If that’s true, coming out at the very beginning and making a big show of the fact that he might be a bidder is unlikely to have endeared him to the few outside shareholders who supported him.

And, obviously, if Barnes & Noble is in play, then basically no one has control of the company. You need …

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