The Uncommon Sense of Philip Carret
50 of my favorite Carret-isms
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Last week, a total solar eclipse traced a narrow path across North America — from Mexico down south, through thirteen U.S. states, and all the way up to Newfoundland in eastern Canada.
And, speaking as someone lucky enough to live smack dab in the middle of the eclipse’s “path of totality”, it totally lived up to the hype.
Solar eclipses always make me think of the late Philip Carret. The legendary investor had a most unusual hobby: he never missed an eclipse. Carret (which rhymes with hurray) traveled all over the world to watch every one that he could. In all, he saw twenty of them — including one that took him to Siberia.
“It’s awe-inspiring,” he explained. “The moon takes a bite out of the sun. There’s the diamond ring effect as the sun shines between mountains on the moon. The corona goes for millions of miles around the moon. It’s like a religious experience.”
Carret was a buy-and-hold investor way back before it was cool. He wrote for Barron’s when it was still run by Clarence Barron himself and started one of the first mutual funds with his Fidelity Investment Trust (later renamed Pioneer Fund) in 1928. An initial $10,000 investment with Pioneer would have grown into more than $8 million by the time Carret hung up his hat.
And he did it all with an uber-patient approach to the market.
If that sounds a bit like Warren Buffett’s preferred holding period of forever, you probably won’t be surprised to learn that Buffett and Carret formed something of a mutual admiration society over the years.
“Phil has the best long-term investment record of anyone in America,” Buffett once said. “If there ever was a hall of fame for investment advisors, he’d be among the first ten in it.”
Carret’s connection with the Buffett family actually began with a couple of stock tips from Warren’s father, Howard, who ran a small brokerage firm in Omaha. On one visit, the elder Buffett recommended Greif Bros., a Cleveland-based cooperage, to Carret — and that turned into a fifty-bagger.
One thing that Warren Buffett particularly admired was Carret’s longevity. (He remained an active player of the money game right up until his death at age 101.) “He’s the Lou Gehrig of investing,” Buffett said. “I’d love to go after his record.”
No doubt about it: Philip Carret ranks near the top of the “eminent dead” that I hope to befriend and learn from. And, like so many of the great investors of yesteryear, he had an inimitable way with words that allowed him to distill complex ideas — on both investing and life in general — into snappy sayings.
I’ve gathered together 50 of my favorite Carret-isms as (hopefully) a launchpad for further study into his life and example…
(1) “Common sense is quite uncommon.”
(2) “The most important thing in investing is to use common sense. If it’s not a simple concept, I leave it alone.”
(3) “I haven’t the faintest idea [where the stock market is going]. But I can promise you that someday there will be a big bear market — and a lot of people will lose money.”
A brave warning from Carret during the go-go 1990s bull market.
(4) “To make 10% consistently is a great achievement. Very few people achieve it.”
(5) “I don’t think people [should] buy stock on the basis of complicated mathematical equations. If your research is accurate and you have a good gut feeling about it, you should go with that decision.”
(6) “If it’s a good product and the figures look good, it will usually be a good investment.”
(7) “I’ve never known anyone who’s invested based on a mathematical formula and succeeded over time.”
(8) “More fortunes are made by sitting on good securities for years at a time than by active trading.”
(9) “Trading in and out of the market is the absolute pinnacle of stupidity. [Some investors] buy at 10:15 a.m. and sell at 3:45 p.m. Crazy.”
(10) “I buy stocks for the long haul. Some I’ve had for 40 years.”
When he died in 1998, Carret still owned his position in Greif Bros. — purchased on Howard Buffett’s recommendation decades earlier. For more info on Greif Bros., I highly recommend this recent case study by Dirtcheapstocks.
(11) “I enjoyed 63 years of perfection [with my late wife Betty]. I used to tell people that she was 99.99% perfect, but I really thought it was 100%.”
(12) “My #1 rule is never borrow money. I violated it two or three times. I had a margin call in 1924 and I swore I’d never have another. I came close two or three times.”
(13) “I never borrow money. If you don’t borrow money, you can’t go broke.”
(14) “I had a margin call in 1924 and I swore I never would buy on margin again. That’s one of the main reasons I got through the 1930s.”
(15) “Have reasonable humility. Don’t go way out on a limb. Theoretically, you make money by leverage — but, long-term, that’s bad. Only borrow long-term on mortgages.”
(16) “[Investing overseas] is more difficult because often foreign standards of financial reporting are less rigorous than they are here. So if you want to invest abroad, buy Coca-Cola.”
Reminiscent of how Warren Buffett always emphasized the international sales of Coca-Cola and Gillette when asked about Berkshire Hathaway’s lack of overseas investments in the 1990s.
(17) “What is the simplest company in the market? Coca-Cola. It takes — from my standpoint — a terrible-tasting substance and sells it by billions of gallons and is one of the most successful companies in the world.”
I wish I could agree with Carret here that Coke tastes terrible. Dieting, for one thing, would be a whole lot easier…
(18) “I’m not a trader. I buy things to hold them — not forever as Warren Buffett says he does, but for a long time.”
(19) “Be quick to take losses [and] reluctant to take profits.”
(20) “I have a very simple strategy: I buy good companies at attractive prices. Then I sit on them.”
One company that Carret “sat on” was Berkshire Hathaway. He received his shares through the Blue Chip Stamps merger (at a cost basis of just $235) and held on tight. By coffee-canning his Berkshire position, Carret patiently allowed the magic of compounding — and the benevolent dictatorship of Warren Buffett (see Quote #38) — to do its thing. Smart man.
(21) “I don’t have any rigid yardsticks. It’s a gut feeling. I like a stock better if it’s selling at 12x earnings than if it’s selling at 20x earnings, naturally. But if it’s growing fast enough, maybe 20x is cheap.”
(22) “I think the United States, like all great empires, will probably collapse — but that’s at least 100, probably 200 years away. In the meantime, there’s great opportunity.”
(23) “I don’t like to invest in insolvent organizations.”
Carret’s acid-tongued response to why he doesn’t buy Treasury Bonds.
(24) “Invest in companies whose managements seem to know what they are doing. There are two tests any stockholder may apply. He need not be a security analyst, dissecting balance sheets and income statements. Rather, let him read the chairman’s or president’s letter to the stockholders. Is it optimistic in tone? More optimistic than the figures would seem to justify? This is a bad sign! A competent executive will mention problems as well as results. He is paid to solve problems, not to wrap himself in a cloak of euphoria.”
(25) “A second criterion for appraising management is the stake that officers and directors have in the business … It cannot be emphasized too strongly that a key individual should have holdings worth a year’s salary.”
(26) “One thing I always look at is if they believe in what they are doing. If a key executive doesn’t have at least a year’s salary invested in his own company, I wonder what’s wrong.”
(27) “You can determine something by the tone of the annual report. If the management is always much more optimistic than the results would justify, leave it alone. If the managers sound mildly pessimistic and the results are better than management seems to indicate, it’s a good buy.”
(28) “One thing I like to see in an annual report is emphasis on the negative if the results are good. If the management is cheering for itself in a big way and the results aren’t quite that good, I don’t want any part of it.”
Going back to Greif Bros. for a moment, Carret later said that he was impressed by its annual report — which emphasized the negatives of the business even though it was “growing like weeds”.
(29) “Diligently seek facts. Advice, never.”
(30) “I don’t give a damn what [analysts] say. They’re frequently wrong.”
(31) “I consider a security to be good if it’s in a good industry. For example, I don’t think the automobile industry is a good industry. It’s subject to peaks and valleys. I’d rather have something that grows more or less consistently.”
(32) “Don’t speculate. Buy for the long pull.”
(33) “I bought Neutrogena at 80 cents and I could have sold it at $2. But I held onto it for eight to ten years and it’s at $40.”
Carret also practiced Lynchian “buy what you know” investing. On one trip to Boston, he was so impressed with the soap in his hotel room (Neutrogena) that he researched the company, visited its management, and ended up buying shares. Other lucrative investments in Neptune Meter Co. and North American Van Lines started in much the same way.
(34) “Turnover usually indicates a failure of judgment.”
(35) “It’s extremely difficult to figure out when to sell anything. So I’d rather have the stock taken away from me in a merger or a buyout. It’s much easier.”
(36) “The market always surprises me. Always stay fully invested.”
(37) “I don’t believe in holding cash. Of course, I don’t believe in not having any, either.”
(38) “Management shouldn’t be subjected to proxy fights and that sort of nonsense. A benevolent dictatorship is the ideal arrangement.”
Left unsaid is that if you’re not comfortable with a particular company’s “dictator” and not 100% sure of his or her benevolence, don’t invest.
(39) “[Calvin Coolidge] had the common sense to take a nap every afternoon and let the country run itself.”
(40) “Don’t worry too much [about your stocks]. If you buy them cheap enough, they watch themselves.”
(41) “Three words should be pounded into people’s heads at childhood: Never borrow money. You’re sticking your head in a noose, otherwise.”
(42) “I managed to lose quite a bit of money in the Bank of New England. I figured that while other banks had made some bad foreign loans, the Bank of New England hadn’t. Unfortunately, they just specialized in making very bad domestic loans.”
Another costly mistake was the time Carret bought an oil company on his bookkeeper’s advice. “He gave us a great song and dance,” Carret said. “That was a disaster.” He eventually pulled the ripcord on this busted tip when the stock languished at just 12 cents per share. (And, to add insult to injury, the bookkeeper turned out to be embezzling money, too. When it rains, it pours…)
(43) “I’ve been involved in the market too long to get excited [about something like interest rate changes].”
(44) “It’s probably not good investing to look for turnaround situations. I would rather see some sign that they are over their trouble — like earnings for a change.”
(45) “[Big institutional investors] are trying to be sure they don’t do anything that would appear offbeat to a competitor or the boss.”
(46) “Even twenty years ago, who had ever heard of primes, scores, index options, the triple witching hour? These gimmicks have nothing to do with the … investment possibilities of sound, out-of-favor stocks.”
(47) “RV stocks were all the rage [in the late 1960s] and one would have thought that half the population would abandon homes and wander around in RVs and go live in trailer parks. That, of course, didn’t happen — and these stocks have been in the doldrums ever since.”
(48) When he wasn’t globetrotting in search of the next solar eclipse, Carret also enjoyed “mountain climbing”: “But only the kind where you put one foot in front of the other and walk. I have never hung off the edge of cliffs.”
(49) “Pick your ancestors carefully, don’t smoke, eat and drink in moderation, and never worry.”
Carret’s tips on how to live a long life.
(50) “I like to work, so I have no plans to retire. I expect they’ll carry me out feet first.”
Didn't knew about him, really interesting! Reminds me of reading the Davis Dynasty...
Thank you for sharing my friend!
Where are all these quotes from? Is there a good biography on Carret?