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Avram Fisher, Founder & Portfolio Manager of Long Cast Advisers, is a former equity analyst at CSFB and BMO covering industrials and business services. He has prior experience in private equity; as a corporate governance analyst; as a writer; reporter and private investigator; and as a lifeguard and busboy (I still clear plates when my kids don't). This blog is an open book of ideas about patient investing and about starting up a small-cap focused RIA. It is part decision-diary, part investment observations and part general musings. Nothing on this blog is a solicitation for business nor a recommendation to buy or sell securities. It is simply a way to organize and share thoughts with an expanding audience of independent, patient and talented small cap investors. www.longcastadvisers.com

Tuesday, August 16, 2016

The Bias of Other Shareholders

When the esteemed fashion / style photographer Bill Cunningham died, the WSJ's Ralph Gardner Jr (a colleague from my first job out of college) wrote a piece with a hed / subhed ...

"Bill Cunningham Leaves a Social Void
The late photographer’s presence at an event told you it was worth attending"

... which struck me as a great analog to an activity popular among many investors, which is to look at what other are doing as a way to confirm that the event they're attending stock they're buying is worth owning.

If you're like me, you probably like to know who the fellow owners are and what other good investors are doing. But even while I peek at owners, I remind myself that a company's ownership composition has absolutely no bearing - zero - on its future cash flows, which is the ultimate arbiter of value.

Yet every quarter there's a flurry of time and effort analyzing 13F filings. It is the 3rd biggest waste of time for a practice "generally accepted" among investors. (The 2nd biggest is reading most sell side notes and the 1st is watching business channels).

At least this tweet, which compiles recent 13F filings has the self awareness that yes, it is probably useless. And yet, like a car accident, it's hard not to peak.

Investing is a most personal enterprise, and in some cases a most lonely one. Stop caring what everyone else is doing! Its fine to find comfort in fellow owners and to know what others are doing, but chasing stocks that other's own is a perversion of what makes investing so interesting.

A far better use of time for investors is finding people who disagree with you, a structural advantage for investors who are married.

Remember that the strike zone isn't the same for all hitters. Figure out an investment style that makes most sense to you, find businesses that fit that style, and be okay not giving a hoot what others are doing. You should be good to go.

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