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Up-to-Date Investment Lessons for You from the Best
on September 4, 2000
The bookshelves are full of books containing descriptions of ways to invest based on historical data and models that have not been very fully tested in practice. However, in most areas of human endeavor, a great deal is learned by studying those who are and have been the best for a long time. Money manager John Train has been playing this role for some time with his outstanding books, The Money Masters and The New Money Masters. For about two years, I have been wondering what John Train thinks about the current financial markets. I was delighted to see that he had created an updated and revised sequel to his earlier works.
One of the strengths of John Train's work in this area is that he knows the people he writes about, and the chapters contain discussions he has had with them in most cases. So you get new information that you have not read before in the financial press. He also does a good job of picking a variety of styles and personality types, so you get A to Z with some letters skipped in between in these 17 profiles. These include (in order of presentation): T. Rowe Price; Warren Buffett; John Templeton; Richard Rainwater; Paul Cabot; Philip Fisher; Benjamin Graham; Mark Lightbown; John Neff; Julian Robertson; Jim Rogers; George Soros; Philip Carret; Michael Steinhardt; Ralph Wanger; Robert Wilson; and Peter Lynch. Amongst these men, you will find a variety of growth investors, value investors, those who look to undiscovered markets, intense analysts of trends and individual companies, hedge fund operators, shorts, small cap specialists, and those who focus on emerging foreign markets. It's quite a ride. Naturally, if any of them interest you, you can go further in other sources and learn more.
Warren Buffett, John Templeton, Paul Cabot, Benjamin Grapham, Jim Rogers, George Soros, Robert Wilson, and Peter Lynch have always been people I have learned from, and I was glad they were included. I did not know much about Mark Lightbown and was glad to learn more.
A major strength of the book is that Mr. Train goes on the sum up what it all seems to mean. He says these people validate four styles that work:
"1. Buy into well-managed companies that will grow . . . . When they slow down, sell them and buy new ones.
2. . . . buy stocks that are priced . . . at less than their underlying assets and sell them when they are reasonably priced.
3. Discover a new investment area or one that is . . . neglected . . . .
4. Identify a really good specialist to do the job for you . . . ."
He has a good list of common practices that almost each of the 17 do, that you should find very helpful, as well.
Finally, he talks about what you can expect for the future. He sees the reasonable returns from growth stocks to be 13-14 percent in the future (down from 20 percent in his last book). He still thinks that is a good way to go, but also counsels on when and how to use mutual funds (when they are cheap and give you access to a category you cannot buy efficiently on your own).
He constantly reminds the reader that most investors will earn less than the market average. Rather than sending you to index funds, as many authors do, he feels that by using the lessons here that he outlines, you can hope to do somewhere near or above the average. But you have to be very careful. His philosophy is a variation on the buy and hold growth stock advice that many advocate, but his reasoning and support for the conclusions are more sound.
It would be interesting to see what the stock portfolios do of those who read this book and follow its advice over the next 20 years.
Personally, I am not convinced that the average reader can take even this excellent book and outperform the market. But if you decide to do so, I sincerely hope you succeed.
In any event, you can certainly avoid many costly errors by paying attention to Mr. Train's list of things to avoid doing!
After you have read the book, ask yourself in what other areas of your life outstanding expert case histories could help you improve by overcoming bad habits and developing better ones. Then go find and apply those case histories!