Just watched a video of an interview with Martin Whitman by Wealthtrack.com (link here). The interview was originally broadcasted on October 24, 2013.
Conventional Approach Over-Emphasizes Four Things
- Top-down analysis
- Efficient market
Martin Whitman’s Investment Criteria
- Don’t acquire common stock unless the company has a super strong financial position.
- Don’t invest in common stock unless the company provides full comprehensive disclosure, audited statements, and is traded on markets where regulations are very protective of minority shareholders (e.g. US, Canada, UK, Hong Kong, Japan).
- Only buy into companies when they are selling at a 20-30% discount to readily ascertainable net asset value (NAV).
- NAV (after adding back dividends) can grow at at least 10% CAGR over the next 5 years.
Why Whitman Holds Many Hong Kong Real Estate Holdings Companies
- It is very easy to analyze the NAV of real estate holding companies
- They have a huge presence in mainland China.
- If we are wrong about China, it wouldn’t be economic problems, but more due to social problems.
- If I am buying at a 50% discount, we might not lose any money.
Best Way to Make Money in the Markets
- Safe and cheap – Buy into well-financed companies at huge discounts.
- A lot of well-financed companies are run by ‘dead head’ managements, you want to avoid those.
One Investment That Should be Owned
- Brookfield Asset Management Class A (BAM.A) @ $40.29 on October 23, 2013