10 years later

Somehow, I remember 1997 like yesterday. The cliché "time flies" truly is a cliché.

What is noteworthy and hopefully useful to people of all ages is that over those 10 years I have truly come to appreciate the power of compounding.

Take a look at the prices of the following comapnies in my portfolio on January 26th 1997:

Stock	1997	2007	% annual return
JNJ	$24.62	$66.68	17.08%
AIG	$27.62	$68.89	14.94%
NVS	$25.88	$58.26	12.56%
BRK.B	$1155	$3585.91	21.05%

It is interesting to note that, the stock that I least followed during that period was BRKB (Berkshire Hathway B) and it delivered the best return. My (Heartburn/Profit)% was pretty low with Mr. Buffett's company.

There is something to be said about patient and disciplined investing. You don't have to be a genius, what matters is the ability to maintain temperament, follow good companies, and pick them up when they are not in vogue.

Sounds easy right! However, I have found that to stick with that idea for 10 years is the hardest part.

Eat your beer bottle!

Don't you just hate it when this happens? You finally discovered the most hated stock that the "lemming crowd" avoids. You buy into your research, but learn it the hard way that what you lack is temperament. (Oh! by the way as an affirmative you find that Mr. Buffett holds about 5% of the company.)

Investing boils down to one word "discipline". I will rephrase that, "life is really about discipline". Not to get too philosophical, over the years I have found that, common sense, patience, and probability (wherein an outcome is to a great extent on your side) are factors that really matter in investing. Most human beings are frail and susceptible to the vagaries of their own emotions and their environment. To some extent, the ups and downs in the market are mere reflections of our mood fluctuations.

First and foremost, (taking the liberty to use the opposite sex as an analogy to a stock) I think it's hilarious how Wall Street portrays the so-called "unattractive" woman. She was never ugly to begin with, so simply combing her hair and wearing a push-up bra turns her into a sex bomb!
When we compare this to a stock, it seems that thanks to several upgrade spells cast by the analysts, a stock magically rises from the dead like a gorgeous babe.

I bought into one such "shrek", Anheuser Busch (BUD). Back in late 2005, at $43 BUD seemed a bargain and when I sold it for $48 after 6 months, I thought a return of approximately 12% (without dividends) was excellent.

BUD generated double digit returns of approximately 13% in EPS growth over the last 10 years and has captured about 50% of the US market (a wide moat, or a competitive advantage business in my view). Interestingly, valuation has not kept pace with earnings growth. Today, the company trades around $51 about 12% below my estimated fair value my of about $60. . However, the certainty that the estimated fair value will be achieved without losing much sleep is what makes the stock more attractive to me rather than those upgrades.

The fact that I sold it for $48 and did not wait longer demonstrates my temperament in this regard. As someone said, I think it is "time to eat the proverbial beer bottle!"

Anyway, doing nothing or as one of my friends says colloquially "fuckin' the dog!", sometimes makes more sense.