Superinvestor Digest: Martin Whitman's "Cowardly" Safe-and-Cheap Approach. Monthly Investment Research Chat Tonight.

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Monthly Investment Research Online Chat Tonight
Time: 8PM-9PM Eastern Standard New York Time
Date: Sunday, March 5, 2006 (and the first Sunday of every month)
Place: http://www.paltalk.com
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Topics:
1)Discuss Warren Buffett's new 2005 letter to shareholders and share newly discovered single best ideas.
2)Q&A if you have any questions about our research workshop in July 1-2: http://www.zenway.com/w
3)Scuttlebutt some of the best stock picks presented.
4)Swap best jokes!

Warren Buffett spends a fair amount of time over the phone chatting
with very smart
 people. Our monthly value investing online research
chat is our effort to gather a group of very intelligent investors
doing monthly online scuttlebutt meetings on specific investment
ideas. All of us have mental blind spots. The monthly research
scuttlebutt is designed to get people out of their mental blind spots
by sharing fresh perspectives on each investment.

Don't miss the chance to form mastermind alliances!

________________________________________________
Words from the God: 
Warren Buffett’s 2005 Letter to BRK Shareholders

http://www.berkshirehathaway.com/2005arn/2005ar.pdf

 

Martin Whitman's "Cowardly" Safe-And-Cheap Way To Invest

By Brian Zen, SuperinvestorDigest.com

"We're such cowards!" declared Martin Whitman, the 82-year-old legendary superinvestor, at a seminar organized by New York Society of Security Analysts (www.NYSSA.org) on February 16, 2006, "We only want to be the senior-most creditors in distressed situations. We only want to be the adequately secured lenders in Europe and overseas. We don't want to be subordinate to any of the asbestos or tobacco liabilities..." And he brilliantly calls himself the "safe and cheap" investor.

Marty Whitman's "License To Steal"

The man brave enough to call himself a "coward" is never short of shocking and jaw-opening statements though. Marty Whitman says that he started as one of the "grossly overpaid bankruptcy professionals" in the 1970's. Seeing that a mutual fund business is "a license to steal", he entered the money management business in 1990 through the backdoor via a "hostile" takeover of a close end fund and then opening it. He confesses that he "goes to bed" with competent managers who kiss minority owners. And when Whitman got upset at his investors who exited his underperforming value funds in droves during 1989 and 1999, he told a reporter with undisguised relish, "As for dealing with the public, and you may quote me, screw 'em!"

With first-hand knowledge about the mutual fund business, Marty Whitman made large investments in asset management companies like Legg Mason. To Whitman, money management is a great business, better than the toll booth on George Washington Bridge. "Fund managers are prosperous ¨C no credit risk, no inventory, no fixed asssets, no liabilities, you are talking to the overhead," laughed Marty Whitman.

There are occasional tough times though. Third Avenue Fund's asset under management dropped from $50 billion to $38 billion during 1998 and 1999, which prompted Whitman to echo William Vanderbilt's famous line "The public be damned!"

And that's vintage Marty Whitman, someone who's honest and forthright to the core. He arrives for work on Manhattan's Third Avenue often dressed in an open-collared plaid work shirt, baggy blue cotton pants, worn sneakers, and white socks. One reporter claimed that he observed some sizable holes on Whitman's socks when he was already a multimillionaire. This author personally saw Marty Whitman carried an old and saggy polyester school bag to his talk at NYSSA. (On my lucky day, I could perhaps pick up a similar bag from a neighbor's garbage yard, and I am not exaggerating.) You could mistake this superinvestor for a street person. But Marty Whitman is a legend at picking over the balance sheets of troubled companies in search of hidden treasures. And his track record of approximately 17% per year since 1990 speaks for itself.

Safety First

According to Marty Whitman, the "safe and cheap" investor looks for four things in an investment:

• High quality balance sheet;
• Competent and shareholder-oriented management;
• Understandable and honest disclosure documents;
• Priced at 50 to 60 cents on a dollar.

The first three is related to how safe an investment is. The fourth relates to how cheap the stock is. And "safe" is more important than "cheap".

A special free trial issue of Superinvestor Digest (SiD) with complete notes of Martin Whitman's talk at NYSSA can be downloaded at:
http://finance.groups.yahoo.com/group/zenway/files/SiD/

(You need to apply for a free yahoo ID in order to download the files.)

FINANCIALLY ENLIGHTENING LINKS:

Glenn Greenberg Speaks at Wharton
http://www.whartonjournal.com/media/paper201/news/2005/03/28/News/Investor.Extraordinaire.Speaks.At.Wharton-904160.shtml?norewrite&sourcedomain=www.whartonjournal.com

Bill Miller on Value Investing: "We practice Taoist wei wu wei." (Masterful Inactivity)
http://www.leggmasoncapmgmt.com/pdf/Bill%20Quarterly%20Commentary%204Q%202005%20web.pdf

"Not to do certain things is the way to get things done."
-- Lao Tzu (Translated by Brian Zen)

BOOKS FOR SALE:

Value Investing: From Graham to Buffett and Beyond
http://s1.amazon.com/exec/varzea/ts/exchange-glance/Y04Y1631713Y0945425

Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports
http://s1.amazon.com/exec/varzea/ts/exchange-glance/Y05Y5598416Y1616646

Investment Research & Accounting Workshop:

http://zenway.com/w

(Unlike other investment conferences, our workshop is focused on accounting with hands-on instructions and tutorings. You also get to join a private equity research team with well-trained researchers.)

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