We are busy surviving, herding, fixating on what just happened, and being overconfident!

I think the exercise of trying to figure out how to simplify concepts has been incredibly helpful to me over the last 13 years of teaching and I hope my students have benefited from it.

My goal is to buy a company at a low multiple to normal earnings power several years out and that the company earns good returns on capital at that level of normal earnings. A holding period of more than one year also works quite well as the factors are persistent in years 2 and 3.

Here is part of the tradeoff with diversification. You must be diversified enough to survive bad times or bad luck so that skill and good process can have the chance to pay off over the long term.

If you spend your energies looking for and analysing situations not closely followed by other informed investors, your chance of finding bargains greatly increases.

I wait until an investment idea is so good, it hits me over the head like an anvil.

There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions. You can’t be a good value investor without being an independent thinker – you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do. The back and forth that goes on in the investment process helps you get at that.