In his latest Fairfax 2020 Year End Letter, Prem Watsa discusses the wisdom he uses from investing legend Phil Carret to identify the most successful determinant of long term success in any investment. Here’s an excerpt from the letter:
As I have said to you many times over the past 35 years, I think the most important determinant of long term success in any investment is good management, led by an outstanding CEO.
Years ago Phil Carret, in the book Classic Carret, said it best. Phil Carret in 1928 founded the Pioneer Fund, one of the very first mutual funds created in the United States. Phil, who ran the fund for 55 years with timeless value investing principles, outperformed the S&P 500 significantly.
Here’s what Phil said:
‘‘Good management is rare at best, it is difficult to appraise, and it is undoubtedly the single most important factor in security analysis.’’
‘‘Find the company whose boss is heart and soul dedicated to profitable operation, and even more interested in the profits of five years hence than those of today! If he has sound business judgement, skill in selecting the other members of his team, the rare ability to inspire them to superior performance as well, the company’s stock is worth investigation.’’
‘‘There is no substitute for buying quality assets and allowing them to compound over the long-term. Patience can produce uncommon profits.’’
You can read the entire letter here:
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