Peter Cundill quote

From There's Always Something to Do:

Sir John Templeton said something to me and it stuck in my mind and I didn’t do anything about it at the time. We were on a roll of fifteen years of wonderful results, no down years, a high compound rate of return and some money coming in. He said something which I think is correct, and that Graham also talks about; ‘always change a winning game.’ I didn’t do it because I was on a roll then and I wasn’t flexible enough. There is no investment rule that remains immutable except the margin of safety. There are always breaks and the trick is to begin to anticipate, if you can, where the break points will be and shift. Not the disciplines and not the framework but the tactics that are involved.

Peter Cundill on skepticism

From There's Always Something to Do:

Scepticism is good, but be a sceptic, not an iconoclast. Have rigour and flexibility, which might be considered an oxymoron but is exactly what I meant when I quoted Peter Robertson’s dictum ‘always change a winning game.’ An investment framework ought to include a liberal dose of scepticism both in terms of markets and of company accounts. Taking this a step further, a lot of MBA programs, particularly these days, teach you about market efficiency and accounting rules, but this is not a perfect world and there will always be anomalies and there is always “wriggle room” within company accounts so you have to stick to your guns and forget the hype.

Peter Cundill quote

From There's Always Something to Do:

Routines and discipline go hand in hand. They are the road-map that guides the pursuit of excellence for its own sake. They support proper professional ambition and the commercial integrity that goes with it.

Peter Cundill quote

From There's Always Something to Do:

Curiosity is the engine of civilization. If I were to elaborate it would be to say read, read, read, and don’t forget to talk to people, really talk, listening with attention and having conversations, on whatever topic, that are an exchange of thoughts. Keep the reading broad, beyond just the professional. This helps to develop one’s sense of perspective in all matters.

Peter Cundill's book recommendations

From There's Always Something to Do:

There are a few books – really not that many – which I believe are indispensable reading for every serious investor in whatever facet of investment practice they may favor:

• Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay (only the first two chapters – the title is worth the price of admission!) 

• The Crowd: A Study of the Popular Mind by Gustave Le Bon 

• Buffett: The Making of an American Capitalist by Roger Lowenstein 

• The Money Masters by John Train 

• The Intelligent Investor: A Book of Practical Counsel by Benjamin Graham 

• The Templeton Touch by William Proctor 

• The Alchemy of Finance by George Soros

Peter Cundill on the worst investment he ever made

From There's Always Something to Do:

The worst investment we have ever had was Cable & Wireless, which had built up a large cash pile through the sale of telephone companies in Hong Kong and Australia and their mobile telephone business in the UK. They were well negotiated, judicious sales. What they had left was a stand-alone operation in the Caribbean, which still exists, and they were in the fibre optic business that was blowing cash. So we said, look they’ve got cash, they’ve got a valuable, viable business and let’s assume the fibre optic business is worth zero – it wasn’t, it was worth less than zero, much, much less! Their accounting was flawed to say the least and they became obsessed by a technological dream. In this respect it was reminiscent of Nortel and that should have caused me to think twice. 

I talked to John Templeton about it afterwards and he took a worse hit than us. He said “this is why we diversify, if you are right 60% of the time and wrong 40% you’re always going to be a hero, if you are right 40% of the time and wrong 60% you will be a bum.” I think he probably put it more elegantly than that! But there’s one more thing. We had put a huge amount of time and energy into that one and we were willing it to save itself and, on the face of it, it could have. What we needed was a dissenter in the team – a contrarian among contrarians, a lateral thinker watching out for the left field. On that occasion there wasn’t one. So my thought is, if there’s no natural sceptic on an investment maybe it would be wise to appoint one of the team to play Devil’s Advocate anyway.

Peter Cundill on selling too early

From There's Always Something to Do:

This is a recurring problem for most value investors – that tendency to buy and to sell too early. The virtues of patience are severely tested and you get to thinking it’s never going to work and then finally your ship comes home and you’re so relieved that you sell before it’s time. What we ought to do is go off to Bali or some such place and sit in the sun to avoid the temptation to sell too early.

Peter Cundill quote

From There's Always Something to Do:

Just as many smart people fail in the investment business as stupid ones. Intellectually active people are particularly attracted to elegant concepts, which can have the effect of distracting them from the simpler, more fundamental, truths.

Peter Cundill on investment committees...

From There's Always Something to Do:

To my knowledge there are no good records that have been built by institutions run by committee. In almost all cases the great records are the product of individuals, perhaps working together, but always within a clearly defined framework. Their names are on the door and they are quite visible to the investing public. In reality outstanding records are made by dictators, hopefully benevolent, but nonetheless dictators. And another thing, most top managers really do exchange ideas without fear or ego. They always will. I don’t think I’ve ever walked into an excellent investor’s office who hasn’t openly said “Yeah sure, here’s what I’m doing.” or, “What did you do about that one? I blew it.” We all know we aren’t always going to get it right and it’s an invaluable thing to be able to talk to others who understand.

Peter Cundill on macro forecasting...

From There's Always Something to Do:

Synchronicity begins where pure chance ends, with one event leading to another, like a chain reaction, but all brought about by the initial event which cannot be predicted or explained. In other words – don’t waste your time. Just have patience and make sure you’re confident about the margin of safety in each investment.

Peter Cundill on statistical overvaluation

From There's Always Something to Do:

I almost stopped selling Japan short in the last quarter of 1989 because I couldn’t stand it anymore. But intellectually I was convinced that I was right and so I carried on and then in the first quarter of 1990 the Japanese market fell by 25% in eight weeks and I made back everything I’d given away since 1987 plus a good deal more. But I tell you statistical overvaluation is a funny thing – it can go on for a very long time, far beyond the limits of rationality, and it is a problem for the value investor in two ways: it can tempt one to compromise standards on the buy side and it may lure one into selling things far too early. I have less of a problem with the selling temptation because I have always loved cash – if you’ve got lots of it you will never have to pass up a great opportunity.

Peter Cundill quote

From There's Always Something to Do:

For all my emphasis on the virtues of patience in value investment it has to go hand in hand with minute attention to the detail, with conviction and determination, otherwise patience is just futile endurance.

Peter Cundill quote

From There's Always Something to Do:

The ultimate skill in this business is in knowing when to make the judgement call to let profits run. While it is true that 99% of investment effort is routine, unspectacular enquiry, checking and double checking, laboriously building up a web of information with single threads until it constitutes a complete tableau, just occasionally a flash of inspiration may be necessary. Once we have begun to build a position it has to be recognized that our intentions may change in the course of its construction. An influential, or even controlling, position quite often results from a situation where a cheap security does little or nothing price-wise for such a long time that we are able to buy a significant percentage of the equity. Whether our intentions remain passive under these circumstances depends on an assessment of the outlook for the company and the capability of its management, but I don’t think that we ought to be pro-active merely for the sake of it. My task is principally the identification of opportunity and the decision to press the buy button. This may sometimes turn out to be a catalyst in itself, but normally we should rely on others to do the promotional work or to put the company directly into play. Otherwise it will turn into a constant and time-consuming distraction from our prime objective of finding cheap securities to buy.

Peter Cundill on the timing difficulty of selling

From There's Always Something to Do:

As I proceed with this specialization into buying cheap securities I have reached two conclusions. Firstly, very few people really do their homework properly, so now I always check for myself. Secondly, if you have confidence in your own work, you have to take the initiative without waiting around for someone else to take the first plunge. I haven’t yet found a solution for determining timing on the sell tack. People say it ought to be largely dependent on one’s perception of the trend in the overall stock market, but I am suspicious of this. I think that the financial community devotes far too much time and mental resource to its constant efforts to predict the economic future and consequent stock market behaviour using a disparate, and almost certainly incomplete, set of statistical variables. It makes me wonder what might be accomplished if all this time, energy, and money were to be applied to endeavours with a better chance of proving reliable and practically useful. The timing difficulty in selling does not lie in not knowing when the trading discount to intrinsic value has been eliminated, but in judging by how much it is likely to be surpassed.

Peter Cundill quote

From There's Always Something to Do:

I believe that there is probably one opportunity in every man’s life which demands his knowledge, his guts, his self-esteem, and his judgement. If he seizes it with both hands and it is successful, he joins the first rank, if not he remains a mortal with feet of clay.

Peter Cundill on forecasting

From There's Always Something to Do:

I think that intelligent forecasting (company revenues, earnings, etc.) should not seek to predict what will in fact happen in the future. Its purpose ought to be to illuminate the road, to point out obstacles and potential pitfalls and so assist management to tailor events and to bend them in a desired direction. Forecasting should be used as a device to put both problems and opportunities into perspective. It is a management tool, but it can never be a substitute for strategy, nor should it ever be used as the primary basis for portfolio investment decisions.