Natural tendency for corporate bloating, page-15

Share investing as it is, is risky enough, I don't need to add an extra layer of risks by using debts, options, shorts, CFDs, margin lending or investing in companies with complicated balance sheet.

Now there I am fully with you.

One seasoned investor I knew many years ago used the analogy of the sport of highboard diving. As you might know, each dive routine has its own degree of difficulty which is a function of how many somersaults, pikes, twists and turns it contains.

This particular investor mentor used to exhort his proteges to avoid stocks akin to high degrees of difficulty required for their execution. "Don't buy big splash businesses", he'd say.

I remember emerging with him from a meeting with the management of a certain dubious quality business and him summarising its investment prospects as being like a dive "from the 10 meter board, involving a triple backwards somersault, with two reverse turns, a full pike and twist, followed by a half-pike and reverse twist, landing head-first into a barrel of water. Chances of scoring well with the judges: small. Chances of injury: very high."


"I know there are others who are good at identifying asset plays, turnarounds, etc. I'm fully aware that I'm not one of them, therefore I need to stay within my circle of competence."

Funny you should mention this because, fancying myself as a deep value investor, I have always been drawn to these sorts of asset plays/turnaround plays.

But when I - critically and objectively -audit myself and my investing process over the years, I have to concede that I have, at best, done OK out of investing in poor-quality, but deeply-valued companies (especially when viewed on an effort-to-reward basis).

Most of my wealth has been derived not from buying dogs at twenty cents in the dollar, but from buying high-quality, long-duration growth businesses (such as ARB, AUB, BRG, CSL, DLX, IFL, NHF, REH, RHC, WFD), even after paying what felt like pretty fulsome valuation multiples for them at the time.

There's a lesson in there somewhere.

But, despite this, like a reformed alcoholic walking past the bar, I can't seem to help myself when it comes to sniffing around the garbage bins looking for cigar butts that might have a last few draws left in them.