Peter Cundill

"[Not strictly a technique, just common sense, though psychologically quite tough to do]"

"Current assets to current debt, net profits as a percentage of net sales, net profits as a percentage of net tangible worth, net profits as a percentage of net working capital, net sales to tangible net worth, net sales to net working capital, average collection period, net sales to inventory, fixed assets as a percentage of tangible net worth, current debt as a percentage of"

"– The share price must be less than book value. Preferably it will be less than net working capital less long-term debt. – The price must be less than one half of the former high and preferably at or near its all time low. – The price earning multiple must be less than ten or the inverse of the long term corporate bond rate, whichever is the less. – The company must be profitable. Preferably it will have increased its earnings for the past five years and there will have been no deficits over that period. – The company must be paying dividends. Preferably the dividend will have been increasing and have been paid for some time. – Long-term debt and bank debt (including off-balance sheet financing) must be judiciously employed. There must be room to expand the debt position if required. In addition, studies should be made of past and expected future rates of profitability, the ability of the management and the various underlying factors and hypotheses that govern sales volume, costs and profit after taxes. To the best of my knowledge, this investment philosophy would have outperformed every mutual fund in Canada."

"PETE’S TIPS FOR A GOOD LIFE •Exercise between half an hour and two hours every day. Do more on Saturdays. Take one day off every two months. Keep your body fat at less than 10%. •Don’t be afraid of eating junk food but eat lots of fruit as well. If you choose to eat fat-free yoghurt, make sure you complement this with plenty of hot-dogs, hamburgers and French fries. •Sleep a lot. •Read even more. •Drink alcohol two days a week; once in a while to excess. •Cigarettes are bad. Cigars after a meal are good. •Be curious. Never stop learning. •Once a year run a marathon. Once a year do something that scares the shit out of you: a bungie jump, the Cresta run, white-water rafting. •Laugh a lot but be reflective. •Strive for balance through contradictions. •Be a warrior. Be a priest. Be a monk. Be a hedonist. •Reason and passion go together but not reason before passion. •Rotate between day-dreaming and acute awareness. Do reality checks and focus on detail. •Think positive thoughts even when you’re lying to yourself. The brain"

"WHAT MAKES A GREAT SHORTING POLICY? Not so long ago Peter Ackerman wrote an insightful piece asking rhetorically “What Makes a Great Buy?” In the wake of Nortel this is an attempt at the flip side. •You must have overvaluation to start with. High book values and price earnings ratios with non-existent or very low dividend yields are a good"

"Aρρα was the actual percentage price appreciation, Jρρα the anticipated percentage price appreciation and V a variable to which Peter gave a weighting."

"John Martin’s “Plains of Heaven”"

"Peter had continued to assess his principles of value investment and reached conclusions slightly at odds with purist Benjamin Graham theory."

"Through the long years I sought peace. I found ecstasy, I found anguish, I found madness, I found loneliness. I found solitary pain that gnaws the heart, But peace I did not find. Now old and near my end, I have known you, And, knowing you, I have found both ecstasy and peace, I know rest. After so many lonely years I know what life and love may be, Now if I sleep, I shall sleep fulfilled."

"The essential concept is to buy under-valued, unrecognized, neglected, out of fashion or misunderstood situations where inherent value, a margin of safety and the possibility of sharply changing conditions create new and favourable investment opportunities"

"Schopenhauer"

"General Wolfe"

"Tim McElvaine’s caution on Discounted Cash Flow analysis."

"strongly urge that more attention be paid to balance sheet items such as inventories, pension funds, and extra assets as well as questionable accounting techniques. I would prefer that Discounted Cash Flow Analysis be used only in an analyst’s private working papers. The link between the balance sheet and the profit and loss statement is the source and use of funds. We have done good work in analyzing this part of the business equation. We should do more. I think there is an extraordinary opportunity to build an outstanding business on the old-style value principles as modified by our recent experience and knowledge."

"“Excellence is an art won by training and habituation. We do not act rightly because we have virtue or excellence, but we rather have those because we have acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit.” (Aristotle)"

"Cundill Value Fund annual reports"

"BUT OVERVALUATION IS NOT ENOUGH. Some thought should be given to the general market and the characteristics of the moment … •The shares should be close to an all time high and beginning to drift down. The drifting down is probably a better working model as an all time high can keep on trucking. •There should be the potential for an earnings disappointment. For example in the U.S., when the dollar is strong there is an automatic negative effect on U.S. Internationals. This, of course, applies to all currencies wherever there are businesses that are export led. •Lots of debt makes a short seller’s job easier. •Look out for aggressive accounting, i.e., lots of capitalized expenses. •A whiff of fraud is useful. Check the backgrounds of the board and the management."

"Financial Analyst’s Journal called ‘Black Monday, Black Swans.’"

"It is quite possible to have lived a long time and yet not to have lived at all.”"

"Keep seeking out people who see investment realities as I do. Start to build a network. Do the unappealing things first, never shirk the detail. Detail gives the grounding for strategy and keeps the mind clear. Intuition based on experience and instinct is what makes investment an art form."

"“The value of life lies not in the length of days but in the use made of those days."

"•Seek order, confront chaos, retreat from the maelstrom. •Be open, but you can keep a few dark secrets. •Be a historian, be a prophet. •Be deductive. Be inductive. •The stock market is almost always wrong; once in a while it is right. •God is infinity. Don’t question any further. This is an absolute truth. •Don’t own a car. Ride a bike. Use the subway. Hire limos. •Remember that in life one is both a participant and an observer. •Study systems and financial statements. Remember, though, that the beauty of numbers can delude. Be intuitive, warm and fuzzy…"

"You need to get into some situations which make your gut tight and your balls tingle. I think I can now afford a few hates: I hate people who are imprecise and I hate those who want to create chaos and mayhem in the world. I believe in change, but measured and controlled. I do see that the establishment needs the avant-garde – what is brand new challenges complacency and anyway, in a consumer society where obsolescence is vital to progress, only stasis is frightening."

"•How he is seen by others, both the wide public perception and the more intimate perception of friends and family. It appears simplistic until you think about it, but in essence it is a pretty accurate assessment."

"“ennui,”"

"Rit = αi + βiRmt + Σit"

"Entertaining as the walks were, they represented less than half an hour of the day and could never have compensated adequately for full access to the world of culture that lay at his doorstep in one of the planet’s greatest cities. It was a world that Peter truly missed. The sight of him rather pathetically leafing through The Week, the best of London’s “what’s going on” digests, was more than sad; it was irritating."

"hundred securities trading below our punitive definition of net cash. In those cases you are in effect paying a negative price for the business. I should add that all the companies that we are looking at, or that we own, are making money. In many cases they have no debt and in about 80% of cases, they are not spending their cash flow so they are generating free cash. That’s because they’re frozen in the headlights like mesmerized rabbits because of the huge fall in the Nikkei from 40,000 to well below 20,000."