How I Got Started In Value Investing
I started investing in stocks when I was 14. I didn’t have any real strategy or philosophy. I just tried to buy simple businesses for below average prices. I bought shares of grocery stores, snack food companies, etc. Examples of stocks I bought back then include Village Supermarket (VLGEA), J&J Snack Foods (JJSF), and Activision (ATVI). This was around the time the dot com bubble reached it’s height (like 1998-2000). Many of the stocks I bought were in my home state of New Jersey. I tried to stick to things I was familiar with. I was completely buy and hold back then.
My Dad read an article about Ben Graham. At this point, I was picking all the stocks for my Dad’s portfolio and he thought Ben Graham’s approach sounded like mine. I always started with the balance sheet. Mostly because as a teenager, I had no accounting experience, so the income statement was harder for me to understand. I was pretty much a balance sheet and cash flow statement guy. Mostly, I still am.
Anyway, when my Dad told me about Ben Graham I went out and bought Security Analysis and The Intelligent Investor. I read them and was hooked. After that, I tried to learn everything I could about Warren Buffett’s partnership days and Graham-Newman’s actual operations. I collect Moody’s Manuals from the 1910s to 1940s so I can look at the stocks Ben Graham mentions in his memoirs and Graham-Newman lists in their annual reports. Things like that.
I realized that Buffett and Graham both did best when buying really tiny, illiquid, unknown stocks. Graham did better than 20% a year just in net current asset stocks. And Buffett really does seem to have done 50% in his personal portfolio in the early 1950s. Their better known investments were good – but with the exception of GEICO – never really on the level of those kind of returns they were getting in tiny, unknown stocks.
So that’s become my focus over the years. I turn over my portfolio much more now. I’m willing to sell anything when I find something clearly cheaper. I’m not buy and hold. But I try to own very, very few stocks. Basically, I try to copy Warren Buffett’s approach to his own personal portfolio.
Unfortunately, what I invest in and what I write about doesn’t always match. Most readers are interested in bigger stocks. So I write about them most of the time.
My true love is really tiny, off the map stuff. Bancinsurance is probably the best example of what I invest in. I only managed to buy about 0.5% of the company. So, it wasn’t a huge financial success. But it’s the clearest example of what I look for these days.
Talk to Geoff About How He Got Started In Value Investing