Tag Archives: fishing

Fishing for Value

Is investing like fishing?

Photo: João Pacheco. Source: Picjumbo

In 1653 Izaak Walton published “The Compleat Angler,” a short treatise on fishing. In this little book he explains that fishing is a pursuit that can never be truly mastered. When you go fishing, there’s always a new lure or a new location or some other shiny new toy to try out. “But he that hopes to be a good angler,” Walton continues, “must not only bring an inquiring, searching, observing wit, but he must bring a large measure of hope and patience.” He describes fishing as a perfect combination of contemplation and action.

I would agree. I grew up fishing in Minnesota. Times spent on a lake or stream have been relaxing and contemplative, punctuated by short bursts of energy where quick thinking and decisive action are necessary. Nothing quite matches the thrill of bringing in a “lunker” after a long and careful pursuit.

Photo: Doug Tengdin

It’s the same with investing. Investors need inquiring minds, hopeful dispositions, and patience. It can take some time for a disciplined investment approach to produce results. At the same time, we need to be diligent to make sure that the main idea behind our investment thesis hasn’t changed. We can’t allow ourselves to be whipsawed by every new fad or fashion that appears – but we can’t ignore the fact that circumstances change over time. And nothing quite matches the thrill of buying a “ten-bagger” – a ten-for-one winner.

Good investing is both art and science. It’s a science as it applies to investments, but an art as applied to the investor. Every investor is unique, with unique objectives and limitations. Applying the right investment in the right circumstance at the right time is something that – as Walton would say – is satisfying in the result, but also in its application. Investing, like fishing, is a reward unto itself.

Douglas R. Tengdin, CFA

The Compleat Investor

Is investing an art or a science?

Woodcut by Louis John Rhead. Source: Wikepedia

In 1653 Izaak Walton published “The Compleat Angler,” a short book on fishing. In this little treatise he compares angling to mathematics – something that can never be fully learned. There’s always a new approach or a new location or some novel piece of equipment. “But he that hopes to be a good angler,” Walton continues, “must not only bring an inquiring, searching, observing wit, but he must bring a large measure of hope and patience.” He describes fishing as the perfect combination of contemplation and action.

It’s the same with investing. Investors need inquiring minds, hopeful dispositions, and patience. It can take some time for an investment approach to work out. At the same time, we have to be diligent to make sure that the main idea behind our investment thesis hasn’t changed. We can’t afford to be whipsawed by every new fad or fashion that appears—but we can’t ignore how things change over time.

Good investing is both art and science. It’s a science as it applies to investments, but an art as applied to the investor. Each investor is unique, with unique objectives and limitations. Applying the right investment in the right circumstance at the right time is something that—as Walton would say—is satisfying in the result, but also in its application. Investing, like fishing, is a reward to itself.

Douglas R. Tengdin, CFA

Chief Investment Officer

Fishing for Beginners

What do you need to start fishing?

Photo: Natureworks. Source: Morguefile

Not much: just a hook, a line, and a body of water. And the desire to catch a fish. I remember my 5-year old cousin wiggling her drop-line away from the sunnies approaching her hook, saying “No no fishy, you’re too small.” She was so cute that the adults in the boat barely noticed we were drifting dangerously close to a dam.

As our desires grow, our gear gets more complex. There are different types of rods, reels, and line; boats and boots; electric motors and cruising motors. You may want to consider hiring a guide. All the equipment can seem pretty intimidating. But it’s there so we can catch the kind of fish we want to.

At its heart, though, fishing is simple: get the fish to bite on a hook and pull it in. If you have enough time, you can sit by your favorite fishing hole for hours with nothing but a stick, a line, a bobber, and a baited hook.

It’s that way with investing. If you’re just beginning and don’t have much saved, a basic indexed mutual fund should do. Some only require $1000 as an initial investment. As we accumulate more money, other factors become more important—fees, tax-efficiency, liquidity, tailoring the portfolio to fit our needs. There are lots of reason why a collective fund may be less than ideal.

But it doesn’t take much to get going. As with fishing, the important thing is to start. A trip of a thousand miles begins with a single step.

Douglas R. Tengdin, CFA

Chief Investment Officer

Angling and Other Anglers

“The majority is never right.” – Henrik Ibsen, An Enemy of the People

Photo: Francis Hannaway. Source: Wikipedia

Have you ever been to a fishing tournament? At the starting time, dozens of boats roar off to their favorite fishing holes, which quickly become crowded. There are usually two winners: the one that pulls in the most weight and the one that catches the largest individual fish. In the US, there are over 30,000 fishing derbies every year.

Watching a tournament can be fun. You learn where the best holes are, what the pros use for bait, and other tips. But it’s also instructive to see who wins. The biggest fish usually doesn’t come from the mass of boats gathered in the most popular spots. They come from folks who get away from everyone else, who may try something unconventional.

Investing is similar. Investing with the crowd rarely delivers exceptional performance. Put another way, conventional thinking yields conventional returns. There’s a universe of other people out there who are all evaluating the same set of investment opportunities. Following what most people are doing will give results similar to most people. But it’s not enough just to be different. Just because no one else is playing tennis on the freeway doesn’t mean it’s a good idea! Put another way, there’s no upside in taking a contrary view to the solution of 2 + 2.

You can’t just to bet against the crowd. Successful investors need to know why the mob is mistaken. Only positions taken with the confidence of a strong decision-making process can be held—and even increased—when they look like mistakes rather than winners, and losses accrue rather than gains. Markets—and companies—can remain over- or underpriced for years. Eventually, good ideas pan out. But you have to be able to hang on until they do.

Leadership is lonely. But it’s absolutely necessary if you want to achieve superior results. Jean Paul Sartre famously writes that “Hell is other people.” For investors—and anglers—sometimes you just have to ignore other people.

Douglas R. Tengdin, CFA

Chief Investment Officer

Fishing for Value

Finding valuable investments is a lot like finding a good place to fish.

Photo: Volker Lekes. Source: Pixabay

In both cases, you need to keep working at it. On its face, fishing is pretty simple: cast your lure out where the fish are biting and reel them in. In the same way, value investing is simple as well: find companies selling at a discount to their intrinsic value and buy them. A company selling below its intrinsic value offers investors a margin of safety.

But finding them is never so simple. With fishing, you have to consider the time of day, the wind, whether it has rained recently, and what kind of season it’s been this year—hot and stormy, or cool and placid. All of these affect where the fish like to hang out, and what lure they might be attracted to.

Value investing gets complicated, too. Intrinsic value is just the present value of all the money a company will deliver in the future. The concept seems pretty basic; the practice is a lot more subtle. Is the cash flow stable or volatile? Stable cash flow is worth more. How much debt does the company have on its balance sheet? Debt increases risk. How fast—and for how long–can they grow earnings? And how much experience does this management team have in producing a steady, growing earnings stream?

Source: Charles Brandes, Brandes on Value

Both fishing and investing require great patience: casting your lure out over and over again; examining company after company, year after year. But both offer great rewards, not just in what they produce, but in the process itself. You learn new things all the time!

In the 17th century Izaak Walton wrote that fishing is so pleasant that it is a reward to itself. It brings a “calmness of spirit”. Finding investment value is similar. Just get there before other anglers—and other investors—scare away all the fish!

Douglas R. Tengdin, CFA

Chief Investment Officer

Fishing For Investments

Is investing like fishing?

Photo: Trond Larsen. Source: Pixabay

There are a lot of similarities. Both involve searching for something you can’t immediately see. Both require lots of patience. And both give you a deep sense of satisfaction when you’re successful.

I grew up fishing. From before I could walk my parents would take me out in a launch. Some of our best family memories come from week-long fishing trips on the Canadian border—going out early in the morning, eating a shore lunch at noon, then fishing some more in the afternoon, fileting and freezing what we brought in. At the end of the week we would drive home with a freezer full of fish, and would re-live that trip all winter as we gradually consumed our store.

A lot of what makes for success on the water is also helpful when you invest. The first item is preparation. A productive fishing trip starts well before you head out—getting the right equipment, understanding where you’re going, and what you’re fishing for. Fishing for bass is a lot different than fishing for lake trout. Good anglers spend countless hours poring over maps, lures, and other equipment.

In the same way, investors need to prepare. What do you want from your investments? Are you looking for growth or income or a little bit of both? Are you more interested in safety or performance? And do you want to do it yourself, or are you interested in a working with a guide?

Success—in fishing, or with investing—doesn’t just happen. It has to be planned. And it starts by understanding what you want.

Douglas R. Tengdin, CFA

Chief Investment Officer