David Winters Quotes
110 David Winters Quotes
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[In November 2004 on his biggest mistake in the last three years.] Not fully understanding how rapidly pricing power had deteriorated in a business such as supermarkets.
David Winters
[In November 2004.] I didn’t fully appreciate the effect that companies such as Wal-Mart and Costco would have on the economics of the supermarket industry. The lesson I learned is that if someone else is willing to operate with different economics – in effect, playing the role of spoiler – you really have to pay attention. You have to determine whether the underlying business has deteriorated so much that the value of a company is much less than you had originally judged it to be.
David Winters
[In November 2004.] We wanted to make sure that we didn’t get a lot of hot money flying in and out of the fund.
David Winters
[In December 2005.] If you love investing, you want to have a palate with as many colors as possible.
David Winters
[In December 2005.] The traditional telephone business is under siege, and most companies don't acknowledge it.
David Winters
[In December 2005 on Michael F Price.] Price hired ambitious kids and preferred to train you to think. His mantra was, ‘Do the work’.
David Winters
[In April 2006.] I started at Mutual Series when I was 25, and I was already hooked on value investing.
David Winters
[In April 2006.] Our competition for investment opportunities, as well as the kind of research we do, is as much the hedge funds as plain vanilla mutual funds. We've tried to create a hybrid here where we have the transparency of a mutual fund and the flexibility of a hedge fund.
David Winters
[In July 2007.] People matter. In general, the best investments and worst investments are because of people.
David Winters
[In July 2007 on managers in Canadian Natural owning $1 billion worth of company stock.] They’re in the boat pulling the oars in the same direction as shareholders.
David Winters
[In July 2007.] My ideal investment is, first of all I want a good underlying business. A business that is, hopefully, getting better over time, so time is your friend.
David Winters
[In July 2007.] I really need to have management who are committed to doing the right thing…
David Winters
[In July 2007.] Most people don’t like complexity. This business is about people basically being spoon-fed, and if you have a conglomerate that requires a lot of work and more than one sector, that really turns people off.
David Winters
[In July 2007.] In the bad investments, the more you dig the more you find additional skeletons in the closet (Eg. Toxic liabilities that aren’t on the balance sheet.)
David Winters
[In July 2007.] Often you can figure out pretty quickly if an investment is one where the assets are understated, or is it one where the liabilities are understated. You want lots of assets for free, or the potential for free.
David Winters
[In July 2007.] In almost any business other than an asset play, risk and reward are evaluated on the basis of how much cash you can generate over time.
David Winters
[In July 2007.] There are many businesses that are so brutally competitive that they don’t have any ability to raise their prices.
David Winters
[In July 2007.] Has there been a fundamental change in the underlying economics[?] For many years the newspaper business was a virtual licence to print money. If you owned the newspaper you were one of the richest people in town. Now that is no longer the case because you’ve got classified and display advertising going to the internet. Newspapers have lost pricing power and they’re losing revenue.
David Winters
[In July 2007 on industry fundamentals changing.] I think you really have to pay attention to whether there is a game change, and that’s not always apparent in the valuation or in the annual report.
David Winters
[In July 2007.] There are a couple of reasons why you should sell. One is if you made a mistake… The other big reason to sell is if the valuation gets out of whack.
David Winters
[In July 2007.] I think one of the things we all have to do is to be intellectually honest.
David Winters
[In July 2007.] Instead of being an ostrich about investing, sticking your head in the sand and hoping things improve, often the best thing to do is to realize you’ve made a mistake and to sell.
David Winters
[In July 2007.] When you own something wonderful, if it approaches or becomes fully valued, it often makes sense to sell. Even when an investment is great, if it trades at full and fair value, at best it’s dead money. And in all likelihood there is a better use for the money elsewhere. So you have to have the discipline to say, ‘The company has done its heavy lifting for me. I’ll pay the tax and move on.’
David Winters
[In July 2007 on Discounted Cash Flow (DCF) – Trying to evaluate the future valuation of a company based on it’s future cash flows which can be highly variable and in most cases almost impossible to forecast with great accuracy.] I think of DCF as garbage-in, garbage-out. Conceptually it’s right but the ability of anybody to make accurate estimates is low… I share Michael’s [Price] skepticism about DCF. I think it’s an over-rated tool.
David Winters
[In July 2007.] One of the lessons I learned from Michael [Price] was not to be so dependent on earnings. Wall Street is so obsessed with, ‘Did they beat by a penny? Did they miss by a penny?’ If you’re investing in securities that are so contingent on that, the possibility increases that you’re going to get beat.
David Winters
[In July 2007.] Our approach is to try to buy today at a discount and get tomorrow for free.
David Winters
[In July 2007.] Somebody showed me a DCF model last week and I looked at it and I was pretty skeptical. They had a terminal growth rate of 2%, and I asked, ‘What happens if it becomes 5%?’ The value went up by 100%.
David Winters
[In July 2007.] The bubble years, when people were extrapolating things far into the future that ended up being preposterous, while at the same time you could buy real companies like Brown-Forman, that distils Jack Daniels. At the height of the bubble Brown-Forman dropped to a valuation that was probably half of what an arm’s-length transaction would take place at… Brown-Forman had no debt, net cash on the balance sheet and a LIFO [Last In First Out.] reserve.
David Winters
[In July 2007.] People were buying DCFs because they wanted get-rich-quick schemes.
David Winters
[In July 2007 in the dotcom boom.] You had to realize that the world had sort of taken leave of its senses… There was a lady who wrote me a hand written letter complaining that I was a dinosaur, and she said that I didn’t get hot investment results because I didn’t own Cisco Systems. She wasn’t alone in that opinion. There was tremendous pressure from multiple directions to capitulate, and I refused to capitulate.
David Winters
[In July 2007 on the dotcom boom and buying traditional companies that were unloved at the time because they weren’t ‘dotcom’ related.] The thing that I found so amazing was that there were wonderful companies you could buy that I had drooled over for years, but could never own because they were always trading at big multiples. So we were able to buy some very compelling things… It ended up being wildly profitable for our fund investors.
David Winters
[In July 2007 on being able to take advantage of Mr Market.] You really have to have the right temperament and discipline to do this, and I don’t think most people do.
David Winters
[In July 2007.] I like to dissect where a company got its earnings: Was it gains? Was it from operations? I think organic growth is a really important measure. And was organic growth achieved through sales and/or margin?
David Winters
[In July 2007.] A lot of this business is based on judgement…
David Winters
[In July 2007.] The importance of management. That’s one lesson I’ve learned: the importance of the people you hand your wallet to.
David Winters
[In July 2007.] You want a good company you can invest in, or that has good assets, but you also really must have people who are going to make that company work for you.
David Winters
[In July 2007.] You have to figure out if management is motivated to just make a bunch of money and go to the beach, or if they love the business…
David Winters
[In July 2007.] We’re very risk adverse… and we want to do really well, but we don’t want to take a lot of risks to get there.
David Winters
[In July 2007 on value traps.] You have to try to figure out if the business is any good, and whether the people are any good, but you know if you find something that’s a value trap, time is your enemy. You really want time to be your friend.
David Winters
[In July 2007.] It’s kind of a neat thing to own a piece of a business where 24 hours a day they’re working hard for you. We love those situations.
David Winters
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