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Great Investment Reading

Originally posted here at

One source of great investment thinking that I have enjoyed for some time is the market commentary at the investment firm Horizon Kinetics. I particularly like the two following essays, even though I think they are all worth reading.

  • Scalability - Great essay that explains the very important concept of operational leverage, which I believe is one of the most important ideas in business or investing. Operational leverage can allow for substantial free cash flow generation while requiring only a low level of incremental capital spending. Free cash flow can then be re-invested, which accelerates the compounding process. I discuss this basic idea in this article, but a different context.
  • The Consequences of Portfolio Turnover - Shows the power of allowing an investment to compound in one good company over a long period of time. To me this type of logic demonstrates that if you want to trade, you need to do it in a non-taxable account, and/or you need to shoot for much more significant returns that make risking the "churn" of taxes and fees worthwhile.

One think Murray Stahl focuses on allot is what he calls the "owner-operator" model. It was this concept that first attracted me to his writings, as I have always been attracted to the notion of investing beside a controlling shareholder or highly talented (and highly invested) CEO. A perfect example of this would be my articles on National Beverage, my latest being here. In fact, this might be the area where I have experienced the most in terms of investing success - It has really been a focus of mine. You can find the "owner-operator" concept in many of Stahl's essays, but this one is a good intro:

I will only be linking to content on other sites when I think it is super-worthwhile to read, so if this stuff interests you, make sure to check the above links out. I am working on an article on a company that combines an owner-operator CEO, superior operating leverage, and a new product that looks very promising. Make sure to check back, or sign up to the free email list to stay informed. Hope everyone is having a great weekend.