Good morning my dear readers,

I came across a very good story, about a man named Shelby Davis, who is probably 'one of the best investors which you would have never heard about'.

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Background: He started late, very late, at the age of 38!, With $50,000.

(I am 38 now, btw).

His starting age of 38 makes his story all the more remarkable to me.

He went on to compound at 23% over 50 years and had amassed a great fortune of $900 million when he passed away, aged 85.

And this feat easily puts him in the investing hall of fame.

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His biggest rule,

'The Shelby Double Play'.

He mixed 'value + growth' together.

While he ALWAYS wanted very cheap companies, he also always only invested in companies which will show good growth.

(So that, once these kind of companies showed growth over few years, their P/e ratio would also automatically expand).

Basically, he was a great lover of the 'Re-Rating' factor.

(Coincidence, for me too, this IS THE ONLY REASON I do Special Situations).

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His second biggest rule,

Invest only in companies and sectors he understood, which was Insurance in his case.

He was an Insurance analyst on Wall Street before he became a full time investor.

He understood Insurance deeply and hence almost his entire wealth was tied up in Insurance stocks which were boring but good businesses.

(Buffett-esque).

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Conclusion:

'Re-Rating' is the most important thing in investing, it is practically the 'Ram Baan'.

(Till date, I have never come across any legendary investor, who did Coffee Can investing of buying good but slow and extremely over priced companies)

The real trick is in 'Good + Cheap + Growth'.

And secondly, coincidence again, I have always told to invest in what you understand.

People working in IT sector, have Maruti stock, doesn't make sense, for example.

(It's tragic that people working in Auto field missed the great rise of Maruti and the people in IT missed the great rise of Infosys/TCS).

But no more, it's time we right the wrongs.

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Unfortunately though, the old ways of Shelby Davis and Warren Buffett are over.

Simple value investing doesn't work easily now a days. The good companies are all expensive. The cheap ones are duds.

(Market knows most things now a days).

Hence I believe in Special Situations, which can offer a chance to acquire Good+Cheap+Growth stocks, due to forced selling.

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I will share some amazing, past case studies on Special Situations in the coming Newsletters.

Until then, one last factoid on Shelby Davis, which will help on self improvement.

His portfolio regularly saw 25%-50% dips, but he never cared for 'Stop losses' as long as the fundamentals of the insurance sector and his companies were "Long term okay".

(I keep getting asked by some potential clients sometimes, what's my 'stop loss' strategy, I say the same as written above, "As long as long term fundamentals are okay, we are okay to hold in a bearish market which could be temporary in nature".

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Last one to finish today's coffee is a monkey.😅

#SchoolGames

My best,

Neil Bahal

Founder

Negen Capital