Sometimes, I think those of us in the investment business strive to obtain the abilities of Star Trek’s Mr. Spock. Spock, the half-human half-Vulcan, learned to ignore the human emotions buried inside his self and use logic in order to solve the problems before him. Just think, what great investors we could be if we could simply control our human nature. As a Vulcan, we could construct an investment portfolio that would produce higher returns than any human could produce. As a Vulcan, we would not worry about commissions and taxes, or have any qualms about borrowing someone else’s money to use and invest. After all, our Vulcan logic could easily create the portfolio that not only covers any and all costs, but would effortlessly reside on the “efficient frontier,” where no man has gone before.
Of course, striving to be a Vulcan carries a terrible price with it. Think of what your life would be like without joy, happiness, fear, love, anger, worry, greed, sadness, hopefulness, cheerfulness, sympathy, helplessness, excitement, relief...and so much more that makes us human. One of the characteristics of exceptional investors is their ability to understand those human emotions that impact our ability to profit through investing. A few of these individuals have shared their thoughts with us on this topic through their writings, including Douglas H. Bellemore.
Doug Bellemore taught investments for 40 years at New York University’s night school. I would have loved to have taken a course from him, along with many other excellent investors that chose to share their insight through teaching. But alas, I could only learn from them through the written word. I found out about Mr. Bellemore in a round-about way; by reading a court case. In the late 1960’s Etson B. Jeffress the sole owner of Concord Mobile Homes sold his business to Champion Home Builders Company. Without getting into the details, a lawsuit ensued between the parties that ultimately led to a determination of liability through the courts. The experts involved in the valuation of Mr. Jeffress’s company included a younger Martin J. Whitman (I have mentioned Marty Whitman many times as one of the nations great investors) and Douglas H. Bellemore. The courts use of the valuation models produced by these gentlemen and two others, Douglas A. Hayes and Baird P. Swigert, is still worth studying, for anyone interested in the valuation of business.
In 1963 Simmons-Boardman Publishing Corporation published his The Strategic Investor. What follows are pages 23-25. Since Mr. Bellemore wrote this book, the size of the markets has increased dramatically in total value. In addition, new products and services created and offered by the financial services industry have changed the way a conservative or aggressive investor can participate in these markets. What Mr. Bellemore considered an aggressive or conservative investor doesn’t have the same meaning in today’s world. So as you read the passage, pay less attention to these descriptions and concentrate on the human characteristics that are just as important for all investors today as it was 50 years ago.
Until next time,
Kendall J. Anderson, CFA
Characteristics For Success As Aggressive Investors
By: Douglas H. Bellemore.
Not all investors have the innate or acquired personal characteristics that are mandatory to succeed in building a portfolio of common stocks that will significantly outperform the market over the years.
What are the traits required for success as aggressive investors? Basically they are five:
Finally, each investor must ask himself whether he meets the qualifications that have been discussed for successful investing. Failure to meet any of these makes it probable that by following an aggressive approach to investment, the investor will have a poorer record than if he adhered to the tenets held by the conservative investor. Should the investor decide to become conservative, he will at least have the satisfaction of knowing he should do considerably better than the unqualified investor who attempts to pursue aggressive tactics.
There are no short cuts to successful investment for aggressive investors. To earn really sizeable capital gains requires substantially more effort, patience, courage, and intelligence, than that required of the conservative investor.
It requires much more on all of these counts. As in other fields, the investor cannot get something for nothing. Once the investor has selected his own investment classification, he must pursue adamantly the principles of his particular group.
Kendall J. Anderson, CFA, Founder
Justin T. Anderson, President