Confessions of the World’s Greatest Investors

by Alexander Green, Chairman, Investment U
Friday, May 4, 2007: Issue #671

I’ve been spending the last three days at Chateau D’Ermeonville, a charming old pile of stones about 30 miles north of Paris. We’re holding an investment conference here as part of our Grand Tour, a cultural, historical, gastronomical – and wine-drenched – tour of France and Italy.

With the temperature mild and the days sunny, we’re living the Life of Riley here. Yesterday morning, after a generous serving of hot coffee and fresh, chocolate-flecked croissants, I gave a talk entitled “Voltaire on Investing.”

My colleague and Investment U advisory panelist Dr. Mark Skousen took issue with my subject matter, however, claming to the audience that my knowledge of the French enlightenment philosopher was largely the result of having read the first 65 pages of “The Portable Voltaire.”

This charge was totally false, of course. I’m already on page 128.

More seriously, Voltaire is one of the greatest and most universally known figures in all French literature. Born in 1694, he was a poet, dramatist, historian, philosopher, and writer of masterpieces of fiction, such as Candide. Indeed, his shadow is so long that the French Enlightenment itself is known as “The Age of Voltaire.”

This is all well and good, you may be thinking, but how could a French philosopher – dead over 200 years now – make you a better investor?

Business Acumen Worth Millions

As it so happens, Voltaire was not just an influential writer. He was also an exceedingly wealthy man – a millionaire, in fact, before the age of 40. (And this, as they say, was back when a million dollars really meant something.)

A bon vivant, Voltaire began his business career by cultivating a friendship with two brothers in Paris who had a contract to supply the French army with food and munitions. This turned out to be a highly profitable enterprise.

He scored another coup in 1728. That was when a mathematician friend informed Voltaire that the French government had authorized a lottery in which the prize was much greater than the collective cost of the tickets. Voltaire organized a syndicate, bought every possible combination and, of course, collected the prize. He then used this capital to become a moneylender to the Great Houses of Europe.

Clearly, Voltaire was no slouch and there is much that we can learn from his success today.

The World’s Greatest Investors Have All Confessed

Voltaire was one of history’s great skeptics. He was skeptical of the revealed truth of the Church, skeptical of the divine right of kings, skeptical of the wealth and position of the aristocracy, and skeptical of the “wisdom” of the common man.

“Doubt is an uncomfortable position,” said Voltaire, “but certainty is an absurd one.”

You would do well today to heed Voltaire’s advice – and be rightly skeptical of economic forecasters, market timers and other investment soothsayers.

All the greatest investors – from Warren Buffett to Peter Lynch to John Templeton – confessed that they had no clue what the market was about to due next. Instead, they bought companies that were selling for a fraction of their true worth – and sold them when the market recognized that value.

So rather than moving money around in the market based on some pundit’s “macroeconomic” view of the world – complete with forecasts of everything from GDP growth to consumer spending to Fed policy – concentrate on the fundamentals of the businesses you own, or would like to own.

History shows that the market’s biggest gainers are companies with:

• New products and services
• High profit margins
• Accelerating earnings
• Double-digit sales growth
• Heavy institutional support
• Insider buying, and
• High returns on equity

So forget the ever-changing bullish and bearish forecasts from Wall Street and the financial media. If you want to boost your returns, focus instead on the business prospects of individual companies.

It’s worked well for the world’s greatest investors. And for the “Voice of the Enlightenment” as well.

Good Investing,

Alex

Today’s Investment U Crib Sheet

• One of our recent reports highlights two businesses that, at the moment, are relatively undervalued. Each of them pays more than a 4% dividend and boasts return on equity (ROE) figures in the double digits. And business prospects remain highly favorable for the long term. The commodity we’re talking about here is timber, and you can read the free report here: Investing in Timber.

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