Backtracking to 1977, Kahn contributed another article, titled “Lemmings Always Lose” to the journal, in which he outlined the simple rules of intelligent investing:
1. Don’t depend on recent or current figures to forecast futures prices; remember that many others knew them before you did.
2. Prices are continuously molded by fears, hopes, and unreliable estimates; capital is always at risk unless you buy better than average values.
3. Remember that many complex factors—such as accounting choices and the human problems within management and with large shareholders—lie behind reported earnings.
4. Disregard the competition at your peril—they are always attacking your company’s trade position and its earnings.
5
. Don’t trust quarterly earnings. Verify reports through the source and application statement. Figures can lie and liars can figure. The analyst must both practice, and to his client preach, patience. Fortunately for us analysts, it is unlikely that in this ever-changing world any formula will ever successfully replace the study and objective analysis of individual securities.
You say you feel a recovery? Your feelings don’t count. The economy, the market: They don’t care about your feelings. Leave your feelings out of it. Buy the out-of-favor, the unpopular. Nobody can predict the market. Take that premise to heart and look to invest in dollar bills selling for 50¢. If you’re going to do your own research and investing, think value. Think downside risk. Think total return, with dividends tiding you over. We’re in a period of extraordinarily low rates—be careful with fixed income. Stay away from options. Look for securities to hold for three to five years with downside protection. You hope you’re in a recovery, but you don’t know for certain. The recovery could stall. Protect yourself
1. Don’t depend on recent or current figures to forecast futures prices; remember that many others knew them before you did.
2. Prices are continuously molded by fears, hopes, and unreliable estimates; capital is always at risk unless you buy better than average values.
3. Remember that many complex factors—such as accounting choices and the human problems within management and with large shareholders—lie behind reported earnings.
4. Disregard the competition at your peril—they are always attacking your company’s trade position and its earnings.
5
. Don’t trust quarterly earnings. Verify reports through the source and application statement. Figures can lie and liars can figure. The analyst must both practice, and to his client preach, patience. Fortunately for us analysts, it is unlikely that in this ever-changing world any formula will ever successfully replace the study and objective analysis of individual securities.
You say you feel a recovery? Your feelings don’t count. The economy, the market: They don’t care about your feelings. Leave your feelings out of it. Buy the out-of-favor, the unpopular. Nobody can predict the market. Take that premise to heart and look to invest in dollar bills selling for 50¢. If you’re going to do your own research and investing, think value. Think downside risk. Think total return, with dividends tiding you over. We’re in a period of extraordinarily low rates—be careful with fixed income. Stay away from options. Look for securities to hold for three to five years with downside protection. You hope you’re in a recovery, but you don’t know for certain. The recovery could stall. Protect yourself
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