I had a nice long chat with Guy Spier this morning about his new book The Education of a Value Investor, the world, markets and just about everything in between. The hour and 20 minute audio file will be available to subscribers as soon as the techs get it all scrubbed up and the transcript will be posted here once it is ready. It is a long recording so that may take some time! A portion of our discussion was about the importance and difficulty of doing nothing. This is one of the most important skills for success in investing and yet is one that most people simply cannot put into practice.

The constant flow of news and opinion is our worst enemy when it comes to this simple yet critical task. It seems there is always a better idea, a new tip, a new approach that we absolutely must use right now. The amount I information, suggestions , ideas and news that flood at us from the TV and the internet makes sitting still and letting time and valuation work for you more difficult than ever. Most of the time this exactly the right thing to do but we feel more productive if we make a few trades, trade around our positions or chase the hot new idea we just hear. If we measure productivity in investing by profits the majority of the time the most productive activity would have been a nap (speaking of naps it came out during our discussion that I am in really good company with my nap habit. Warren Buffett and Monish Pabrai both have nap spaces in their offices).

As oil has tumbled the past few weeks I have added to one position and added three new ones to the portfolio. I kept them around 1% or so positions as I have no clue what oil many do over the next few months and I very well may be in a position to add if they fall further. Although there is much loud strident predicting going on concerning oil prices I am not so sure that too many folks have a clear idea of what will happen. Looking out ten years I am pretty sure that oil demand will recover and prices will be a lot higher but I have no clue what they may do over the next six month or a year.

Falling oil prices have created a few opportunities (but just a few. There are a lot of cheap energy and oil services stocks but there is a lot of leverage in the sector so safe is a bit harder to find) and I continue to search for, evaluate and buy the small community banks but in the broad market there is not a lot to do right now. We still hold lots of cash across the Deep Value portfolios and will until we get a significant inventory creation event. As long as Mr. Womack stay on the farm, Andy Beal is racing cars and playing poker ,while the ghost of Hetty Green stays quietly on the other side of the veil there is just not a lot to do.

The power of doing nothing is demonstrated in this recent exchange between Barry Ritholtz and James O'Shaughnessy on Ritholtzs excellent Master in Business series on Bloomberg radio.

O'Shaughnessy: "Fidelity had done a study as to which accounts had done the best at Fidelity. And what they found was"

Ritholtz: "They were dead."

O'Shaughnessy: "No, that's close though! They were the accounts of people who forgot they had an account at Fidelity."

Warren Buffett summed up the power of doing nothing back in his 1990 shareholder letter when he wrote “Lethargy bordering on sloth remains the cornerstone of our investment style.”

We got another great example of the Trade of the Decade at work today when Renasant Corporation (RNST) announced that they were buying Heritage Financial Group, Inc. (HBOS). HBOS never made it into the Banking on Profits Portfolio because by the time we started the letter in 2013 it was above my buy limit price to book value but when I first bought it back in 2012 I wrote on Real Money:

The stock is cheap right now at just 80% of tangible book value. The tangible-equity-to-asset ratio is over 11, so it has plenty of capital to fund growth, dividends and stock buybacks in the future. The loan portfolio not covered by FDIC sharing agreements is in sound shape, with nonperforming loans at just 2.24% of total loans. In all, nonperforming assets are just 1.27% of total assets.

The bank just increased in its dividend by 33% in February and has more than 400,000 shares remaining on its buyback authorization. This is a perfect example of a community bank that is safe and cheap. It may not be exciting, but it has the characteristics to be a wildly profitable investment over the next decade.

The stock was trading around $11 a share when I wrote that on May 11.2012. The takeover is valued at about $27 in cash and stock and the stock is trading over $25 today. By comparison the really exciting stocks have badly lagged my boring one. Apple (AAPL) is up 49% since then. Amazon is up 34% and Google is up 75% over the same time frame. Boring it seems, really is better.

If you hadn’t seen the previous emails and posts we have a two for on especial going for the monthly newsletters this month. You can stay on top of Trade of the Decade opportunities in small banks and get the Bottom Decile report that tracks the every cheapest stocks as ranked by price to book value for the cost of just one of them for the year. That works out to just $49.50 a year each. If you are not already a member of these services just click here and join us today.

Have a fantastic week everyone.

Cheers,

Tim

Sometimes the biggest profits are found floating on https://www.youtube.com/watch?v=JUSZbVkkv2w