Tom Stanley, founder of Resolute Funds, has earned a stellar reputation as one of North America's greatest investors. This year has not been kind to investors in Canada and as of the end of November, it certainly was not kind to Tom Stanley either. But then, its been no one's equity market, except if you've been short. For value investors and contrarians, the problem has been that stocks that were deemed to be cheap during last summer, have become cheaper, and much quicker too than anticipated, as equity market liquidation continued and as economic fundamentals deteriorated both in Canada and globally. It is discipline, however, that sets the best asset managers apart from the crowd, and Tom Stanley is perhaps one of the best there is.
We would like to share his investment philosophy with you. We have gratuitously taken the following information from the Resolute Funds website.
About Tom Stanley: After earning his undergraduate degree in Psychology at the University of Western Ontario, Tom Stanley completed his Master of Business Administration at York University. Tom entered the investment industry in 1980 and served as an Investment Advisor for "regular people". He put a strong emphasis on educating the public on good investing practices. To this end, he taught investing at Ryerson University, Seneca College and at neighborhood YMCAs. He was also producer, host and moderator of the TV show "Your Business".
In 1989, Tom became a Portfolio Manager and subsequently founded the Resolute Growth Fund in 1993. He continued serving as an Investment Advisor until 2004 when he retired from this position to focus solely on fund management. His twelve and a half years of managing the Resolute Growth Fund came to an end in 2006, when Tom made the difficult decision to terminate the Fund. At its last month end, Resolute Growth Fund enjoyed the best ten-year performance track record in North America for all funds tracked by Globefund & Morningstar. Tom currently oversees the Resolute Performance Fund, a private mutual fund sold by offering memorandum founded in 2005.
Here as published by Tom Stanley, are Tom Stanley's ideals about investing:
There are many ways to be a successful investor. I have no claim that what has worked for me in the past will continue to work in the future, but I would like to share with you some of the principles I have learned over the past 25 years that have helped me become a better investor.
1. Be a Long Term Investor
Too much emphasis is placed on short-term fluctuations. It is easier to anticipate long-term trends.2. Have a Flexible Approach
Change is the only certainty and as markets change, one should change as well.3. Actively Look for Ideas
I find many of my best ideas; they don't find me.4. Be Skeptical
Check facts directly. Strive to understand the bias and potential conflicts of interest among the sources that provide them.5. I Eat my Own Cooking
My only stock market investment is the Resolute Performance Fund. This aligns my interests with the rest of the unitholders.6. I Buy my Best Ideas
I prefer to buy only my best ideas.7. Filter out the Noise
One of the greatest challenges is to filter out the noise and use only what is relevant.8. Be Thrifty
Moderate costs facilitate moderate fees. Moderate fees facilitate performance.9. Outperform by Being Different
To have a chance of outperforming the market, invest differently than the market.10. Know Your Limits
It is just as important for me to know what I don't know as it is to know what I know.11. Stay Humble
Stay humble or the market will make you humble.12. Being Small is an Advantage
It is easier to outperform being small.13. Apply Spiritual Principles
An important measure of one's success is how much he benefited his fellow man.14. Investing is Not a Team Sport
The best decisions are rarely made by committee.
15. A Good Card Player Does Not Show His Hand
Confidentiality is essential for successful small cap investing.16. Too Much Emphasis is Placed on Precision
I don't need exact numbers to make decisions.17. Be a Contrarian
Being a contrarian is harder in practice than in theory.18. Strive for Effective Rationality
Do the homework; know the facts; and make decisions based on the facts.
Here are some more of Tom Stanley's thoughts on investment management:
Patience and Investing:
“Short term price fluctuations are generally unpredictable therefore, I cannot emphasize enough the importance of patience and investing for the long term.”Finding Ideas:
“Most of my best ideas don’t find me, I find them.”Stay Humble:
“If you don’t stay humble the market will make you humble.”Know What You Don’t Know:
“When investing; it is just as important to know what you don’t know as it is to know what you know.”Widely Held Beliefs:
“Some of my best successes have been betting against widely held incorrect beliefs.”Humility and Learning:
“Humility also means that one should seek out anyone you can learn from.”Only Buy the Best:
“Our most controversial investment practice that has received the most criticism is that we like to buy only our best ideas.”Flexible Investing:
“It is so important to have a flexible approach to investing. Markets change and by limiting yourself you take away many opportunities.”Regarding Performance Fees:
“If someone is paying us a reasonable management fee, I don’t think it is fair to take 20 or 25 percent of all of their profits just to show up everyday and do my job.”Soft Dollar Deals:
“I am dead-set against soft dollar deals. This reprehensible practice of receiving kickbacks on commissions spent should be banned.”Market Indices:
“We deliberately positioned the Fund to be different than the market indices, for to have a chance at outperforming the market you have to try to do something different than the market.”
Source: Resolute Funds
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