In one sentence: Phil explains how he curated his list of gurus to follow through 13F filings (value investors who hold few positions), why Graham's "buy 200 cheap stocks" style differs from Buffett and Munger's "wait for a few great businesses to go on sale" style, and what Berkshire's and Munger's filings do and don't tell you.
Key ideas
- Use secondary sites for 13Fs. The SEC site doesn't show change from quarter to quarter, which is what you want to know. Sites such as Rule1investing.com, Dataroma and others do. Searching "Warren Buffett 13F" finds them. [00:00–02:00]
- Curate, don't browse. Thousands of managers file, and 95% or more are not value investors. Phil's list has 46 names, and even that produces 500–600 portfolio differences every quarter. [02:00–06:30]
- Two criteria for the list. (1) Known value investors. (2) For managers Phil doesn't know, a focused portfolio. Anyone who files with the SEC runs over $100 million, so concentration shows they've done the research on each holding. [03:00–06:30]
- Two schools of value investing. Graham's followers and Buffett and Munger's followers. Graham (Security Analysis, 1934, then The Intelligent Investor, 1949) bought 100–200 stocks that were worth more than their price, sometimes below net cash, and earned 20%+ a year. [12:00–15:00]
- Munger's refinement. As such bargains disappeared, a wonderful business at a fair price replaced a fair business at a wonderful price, with a moat to screen out failures. [15:00–16:00]
- The practical difference for you. Graham's way means being in the market all the time across 200 names. The Buffett way means staying inside one circle of competence and waiting for the best company to go on sale in a recession, selling when it's expensive years later. Buffett says you need about 20 companies in a lifetime. [16:00–18:00]
- Position counts vary. Examples: Roper about 24, Mecham about 25, Ackman 6, Hartland Select Value 229. Buffett holds about 51 but 75–80% sits in the top five or six. [18:00–19:30]
- Know the strategy before copying. Turnaround or activist investors may pay full price expecting to unlock value, and deep value investors wait for obvious bargains. Google the guru and read how they describe their method. [19:30–21:30]
- Long/short funds mislead. A 13F shows only the longs. A big position may be hedged with a short, so the fund bears much less risk than the filing suggests. [06:30, 21:30]
- Reading Berkshire's filing. The big positions (Apple, Coke, Wells Fargo, Bank of America, American Express and others) must be Buffett's because his managers Todd Combs and Ted Weschler run a small slice (about 10% of $182 billion). A tiny new position could be Buffett starting or one of them. [22:00–26:00]
- Munger's own portfolio. He hadn't bought anything for a couple of years, so Phil reads patience and a high market as the message. He holds Costco and Berkshire personally, and spends most of his time reading. [26:00–28:30]
- Read with an eye to business. The reading practice isn't a search of the market. It's reading news and books while asking how each event affects real companies. [28:30–32:00]
- You get better each year. Munger said Buffett improves every year. Practice builds the ability to see more opportunities. [34:00–35:30]
How it maps to RuleOne
- The Radar idea of tracking 13F buys by admired investors applies here, as a tip and never as an order. The screen's event watch is the other trigger.
- Concentration matters when you read a guru: check the share of the top five holdings, not only the number of positions.
- Nothing in the app currently reads 13Fs. This episode is a reason to keep it as a manual step.
Buffett, Munger and Graham links
- Graham: Security Analysis (1934) and The Intelligent Investor (1949). Buffett calls the latter the best book on investing (preface to the 1973 edition and many letters).
- Buffett's move from Graham's "cigar butts" to quality businesses: see the Berkshire 1989 letter, where he credits Munger.
- Buffett's "20-slot punch card" idea is in his Columbia talk "The Superinvestors of Graham-and-Doddsville" (1984) and later talks. Phil states the idea roughly.
Words to know
- 13F: a quarterly report of long holdings by managers with over $100 million.
- Concentrated portfolio: a few large positions, giving a high-conviction approach.
- Long/short fund: holds longs and shorts, so the long list alone overstates its exposure.
- Deep value: waiting only for obvious bargains.
Try this
Open a 13F aggregator and pick one guru. Count their positions and add up the weight of the top five. Then read how that person describes their strategy before looking at any holding. Write down one holding and check it against the screen at All stocks.
Check yourself
- Why does Phil curate the list of 13F filers?
Answer
Most filers aren't value investors, and the volume of changes from thousands of managers can't be researched. - What is the key difference between Graham's and Buffett's styles for you as a part-time investor?
Answer
Graham means holding and trading many cheap stocks all the time. Buffett and Munger means few great businesses inside your circle, bought when they go on sale. - What can you tell from a small new Berkshire position?
Answer
Very little. It could be Buffett starting a position or a smaller position bought by Combs or Weschler.
Short quotes
"Buffett and Munger have found that the less you do the more you make." (Phil, ~17:30, auto-transcribed)