From the best, RHG, to the worst, Timbercorp. I know, and I’m sorry, I shouldn’t go around digging up old graves. But I can’t brag about the winners without fessing up about the losers.
One of my clearest memories from my decade or so at Intelligent Investor is an email we received from a subscriber. I wish I had kept it so I could quote it verbatim, but it went something like: “I don’t know you guys, but I know you are young and I know you are male. Only young males could be so confident”.
At the time we didn’t publish analyst names under the articles but the subscriber was spot on. Greg Hoffman and I were 26 years old when we bought The Intelligent Investor from its founders, John Addis and Robert Carey. And we thought that “value” was something we could accurately calculate.
There is nothing like a few disasters to curb overconfidence. I’m sure Greg has some of his own, but my big disaster was a company called Timbercorp.
The model used to value this company was a thing of beauty and it was giving me a valuation some 50% higher than the share price at the time, mostly attributable to locked in revenues on products that had already been sold. The true value turned out to be zero.
Our third video in our Introduction to Investing Series talks about how this experience scarred me for life. Never again will I be so certain about the value of anything. The world is an uncertain place, and value is a variable quantity.
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