Fidelity PM Learns from Value Greats like Buffett, Graham and Klarman

Chuck Myers, who heads the Fidelity Small Cap Discovery Fund, shared some of the lessons he has learned as a value investor at the recent CFA Institute Equity and Valuation Conference. As reported in Enterprising Investor, these include:

  • “Learn from the best, but think independently.” Myers cites some of the best known investors, and those with excellent records, as influences, but has developed his own “low expectations” approach to value investing by seeking out-of-favor stocks ripe for a turnaround. Myers cites great investors such as Warren Buffett, Benjamin Graham, and Seth Klarman as some of his top influencers in investing. Myers explains that studying Buffett’s shareholder letters and reading Ben Graham’s The Intelligent Investor have helped him develop a strategy for finding value stock opportunities.
  • “Stay within your ‘circle of competence.'” Myers has an excellent stock-picking record, but his fund suffered early when he bet on sectors and became overweight in international stocks.
  • “Aim for the ‘middle of the fairway.'” Focusing portfolio construction on his strengths as a stock-picker to avoid big bets that could go awry has served Myers well.
  • “Relative valuation matters.” Myers looks at both absolute and relative returns, combining the approach of hedge fund and mutual fund managers.
  • “When it comes to turnover, patience is a virtue.” Myers cited Morningstar data to suggest that lower turnover is associated with funds that outperform over the long run.
  • “Focus on a margin of safety.” Myers asks whether a company can weather a severe storm without having to dilute its shareholders during a crisis.