Four Investment Tips from Tom Gayner

Tom Gayner is the Chief Investment Officer of Markel and one of the premier investors in the world. He’s so good that Legg Mason’s Bill Miller, a phenom in his own right, said that Gayner would make the perfect CIO at Berkshire Hathaway. Gayner has four investment tips gleaned from his comments by the Motley Fool:

• Invest in profitable businesses with good returns on capital.
• Find honest and talented management with capital discipline.
• Seek out companies with attractive opportunities to reinvest their capital.
• Buy at a fair price.

It sounds like simple advice but the bottom line is that many people ignore it because they want to hit home runs, rather than doing something more repeatable (and reliable). Those four ideas also happen to coincide very closely with the ideas Berkshire Hathaway’s Warren Buffett has been saying for years. When Buffett was chastised for missing the whole tech boom, he commented that he couldn’t understand the insane valuations and so he bought what he understood. I don’t remember many people mentioning that he missed the bust too.

As for Gayner and Markel:

Through 2007, Markel’s equity portfolio returned 10.7% annually over the previous 10 years, a track record far outpacing the performance of the S&P 500. Though Markel’s equity portfolio has fallen by nearly 15% through the first half of 2008, the kind of market environment we’ve been in provides fertile ground for snatching shares of high-quality companies. In Markel’s last conference call, Gayner remarked, “I’ve never experienced this high-quality approach as out of favor as it is right now, especially since valuations were historically reasonable for these firms as we entered the year.”

Simple Lessons From an Investing Genius [Fool.com]