While Lemelson did discuss some of his positions, including his short thesis on Domino's Pizza, Inc. DPZ and long position in Geospace Technologies Corporation GEOS, the purpose of this report is to highlight some of his market thoughts.
Speculation Versus Investing
Lemelson explained what he believes to be the main difference between speculation and investing. According to the priest and fund manager, speculation is associated with trading while some of the world's most successful people hold onto one notable investment that is held for a really long time.
"There is an old saying as activity goes up returns go down," Lemelson explained. "In my mind, it may sound like a cliché, the long-term horizon is what counts."
Lemelson further explained that his fund buys securities at a price which are believed to be below their fair value. This style of investing also eliminates the long-held notion that investors need to take on higher risk for higher returns.
Nobody Can Predict The Market
Lemelson went on to state the obvious — no one can accurately predict where the stock market will trade at tomorrow, next week or even next year. While he doesn't believe it is possible to predict the market, that doesn't mean that investors can't think ahead and take a look at what individual stocks would look attractive under a market correction.
His advice is simple: Stick to companies that are easy to understand and stay within a "circle of competence." On the other hand, there is great risk for investors to jump into the "spirit of the times." After all, it is human nature to follow a group and in the investing world "that is not a good thing."
Also important to note is that the stock market certainly has cycles and is prone to change direction. The problem is no one knows when exactly these cycles will change.
Finally, Lemelson suggested that a large investor with holdings in up to 100 different stocks are perhaps over-diversifying themselves. He highlighted the fact that Jeff Bezos' core holding is his stake in Amazon.com, Inc. AMZN while Mark Zuckerberg's core holding is in Facebook Inc FB.
As such, if investors have done their proper homework and are confident a stock is undervalued then why not just "act on it" and over-allocate. At the end of the day, great investments don't come along that often.Related Links: Geospace Could Become A $65 Stock In 4 Years Drug Price Bubble A Result Of Decade-Long Economic Policy Issues ________ Image Credit: By Politico16 (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons
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