Pettit Funds

   I read this book several years ago, and enjoyed it enough to also purchase Koch’s The Natural Laws of Business: How to Harness the Power of Evolution, Physics, and Economics to Achieve Business Success.

   Everyone is familiar with the “80/20 Rule” (also known as the Pareto Principle):  Typically, the example used is that 80% of your sales will come from 20% of your customs:

   “Pareto noticed that 80% of Italy’s wealth was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied.  It also applies to a variety of more mundane matters: we wear our 20% most favoured clothes about 80% of the time, we spend 80% of the time with 20% of our acquaintances etc….” (from the Wikipedia article).

   It is one of those “natural laws” so applicable to business decisions that is helpful to keep in mind throughout life.  I’m sure that 80% of my income came from 20% of my clients–and 80% of the aggravation also came from 20%.  The search for that important 20% is what success is all about.   (I’m going to guess, although I haven’t done the analysis yet, that 80% of my stock profits have come from only 20% of my picks…)

   The second book was Koch’s effort to find other “natural laws” that are applicable to business and investing.  I only remember one, but was particularly impressed with its proposition: that a doubling of experience results in about 20% improved efficiency.  That is, a person (or rat in a maze) is going to be able to get things done in 80% of the time once he has doubled his experience.

   I think there’s a lot of truth to that.  If I was starting over as a lawyer right now (instead of retiring in a month after 31 years), I would do even more free pro bono work at first just to get that experience.   The increased experience and efficiency is going to pay off in the long run.

   And a great way to get very worthwhile “experience”:  Read more books, people!

I just read this article in WIRED magazine (best magazine in the world) yesterday, and enjoyed it so much that I’m passing it along:

“He built a reputation as a nightmare boss at Microsoft, a totalitarian who screeched at employees he thought were stupid. He bludgeoned competitors with his illegal monopoly. And he’s a nerd’s nerd — someone who seems perennially uncomfortable around people and only at ease dealing with the intricacies of software code.

“And that is precisely why he’s now saving the world.

“As you probably know, Gates is aggressively tackling third world diseases. He has targeted not only high-profile scourges like AIDS but also maladies like malaria, diarrhea, and parasitic infections. These latter illnesses are the really important ones to attack, because they kill millions a year and are entirely preventable. For decades, they flew under the radar of philanthropists in the West. So why did Gates become the first major humanitarian to take action?

“The answer lies in the psychology of numeracy — how we understand numbers.

“I’ve been reading the fascinating work of Paul Slovic, a psychologist who runs the social-science think tank Decision Research. He studies a troubling paradox in human empathy: We’ll usually race to help a single stranger in dire straits, while ignoring huge numbers of people in precisely the same plight. We’ll donate thousands of dollars to bring a single African war orphan to the US for lifesaving surgery, but we don’t offer much money or political pressure to stop widespread genocides in Rwanda or Darfur….[Rest of article]

   I always enjoy turning to MONEY magazine’s page listing the top 10 performing stocks for the previous month.   Occasionally I’ll find one of my selections there and, indeed, one month I had two.

   And, of course, when that happens I like to crow about it here.

   So, in all fairness, here’s the other side of that coin to prove I’m only human:   In January of 2006,  I took a good-sized position in Excel Maritime Carriers (EXM) at about $11 per share.  It promptly plummeted (don’t recall why) and I sold out at $8 and change a few months later in April.

   And, of course, it has done nothing but go up since.

   Right now it’s at $36.28 per share [Update: 10/11/07–it’s $65/share; groan…] and was the #2-performing stock last month according to MONEY.

   Coulda, woulda, shoulda.  It’s happened before, and it’ll happen again. 

   Good luck, and hang in there!

Marketocracy has posted their “new” list of m10 (Top Ten) funds–their first “new” ranking in four months. (I’m putting “new” in quotes, because–at least for now–the 10 funds are the same as the ones selected back in April). I suppose that it is “healthy” that the list of selected funds has stabilized. In any event, I’m certainly not going to complain, because again–I made the list.

Despite a truly awful last month or so in the market, I’ve been able to achieve better than a 31% percent return for the last 12 months–compared to less than 15% for the S&P 500 over the same time period. (At one point in time, I had been up as much as 50% for the preceding 12 months. But then along came late July and its aftermath…)

Anyway, here is today’s stock tip: Compagnie Generale de Gophysique-Veritas (CGV). This is a stock I had previously mentioned back in May, but rather lukewarmedly. It is a “full-fledged” recommendation now.

Good luck!

   The mutual fund that is run by the owners of the Marketocracy site oft-referenced here, has just been upgraded by Morningstar to being a 3-star fund (4 stars certainly coming close behind!)

   The selections for the fund used to be cherry-picked from the selections of the m100 (top 100 investors) that are followed by the site–and used to have in excess of 1000 different holdings (!).

   It had a bad year and the managers became even more selective,  now making their selections–and fewer of them–exclusively from those stocks recommended by the m10 (the top 10 investors–to which group, at this writing, I still humbly belong).   Take a look at the performances of the m10 folks, and you might decide that this would be a fund you should take some interest in.

   Happy investing!

I’ve never watched nor listened to this guy, nor read any of his books. We’re supposed to take his advice?!