What to Do When the Market Punches You in the Face
Apr 14, 2025
auto_awesome
Chris Mayer, co-founder of Woodlock House Family Capital and author of '100 Baggers', shares invaluable insights on long-term investing. He introduces his 'CODE' method for selecting stocks, emphasizing low prices, owner involvement, transparency, and strong finances, with Brown & Brown as a prime example. Mayer stresses the importance of patience during market downturns, revealing how sticking to core principles can lead to success despite missing immediate opportunities. He also highlights the hidden potential in Swedish stocks, showcasing specific companies to watch.
The CODE acronym for stock selection emphasizes the importance of finding undervalued, owner-operated companies with good disclosures and strong financial health.
Long-term investment strategies, characterized by patience and a multi-year outlook, are essential for navigating market volatility and achieving substantial returns.
Investor psychology plays a crucial role, highlighting the need for discipline during market declines to avoid impulsive, contrary decisions amidst fear.
Deep dives
Core Investing Principles
The key investing principles outlined emphasize a systematic approach to identifying promising companies. The first principle is to seek investments that are undervalued and have the potential for future growth, which is fundamental for successful investing. The importance of investing in owner-operated companies is stressed, as it aligns incentives and fosters better decision-making within the organization. Additionally, good disclosures are essential to understanding the company's operations, while maintaining excellent financial condition ensures stability and mitigates risks associated with leverage.
Long-Term Mindset
A long-term investment strategy is crucial for achieving substantial returns. Patience is highlighted as a virtue in investing, as many successful businesses experience periods of stagnation or volatility without immediate returns. For instance, companies may go through extended periods of underperformance, but a steadfast commitment to holding shares can ultimately lead to significant gains. The conversation underscores that having a multi-year outlook can help investors navigate market downturns and maintain perspective during turbulent times.
Lessons from Successful Companies
Examples of successful companies illustrate the principles of investing in strong corporate governance and sound management practices. For instance, the discussion highlights Brown and Brown, a family-controlled firm known for its effective management and ability to navigate market challenges. Likewise, Old Dominion Freight Lines is mentioned for its long-standing employee retention strategy, which enhances operational continuity. These companies often demonstrate the value of long-term thinking and prudent capital allocation, reinforcing the advantages of investing in organizations with strong leaders who align their interests with shareholders.
Market Behavior and Investor Psychology
The relationship between market fluctuations and investor psychology is a significant theme in the discussion. Market declines can create panic among investors, leading them to make impulsive decisions contrary to their long-term strategies. The speakers stress the importance of maintaining a disciplined approach during periods of market volatility, likening such situations to natural cycles rather than indicators of business performance. This perspective encourages investors to focus on the underlying value of their holdings rather than succumbing to fears triggered by short-term market movements.
The Importance of Personal Principles
Investors are reminded that personal principles should guide their investment decisions, particularly in challenging times. This includes understanding one’s own comfort levels with risk and leverage, which can ultimately affect investment choices. For example, the discussion highlights the contrasting views on leverage, revealing that while some firms thrive under higher debt levels, others prefer to operate with minimal financial risk. Developing a personalized investment philosophy based on individual strengths and experiences can help in making informed and confident decisions, especially during market downturns.
On this week's Stansberry Investor Hour, Dan and Corey welcome Chris Mayer back to the show. Chris is co-founder and portfolio manager of Woodlock House Family Capital – a firm that focuses on long-term, patient investing. He has also written several books, including 100 Baggers: Stocks That Return 100-to-1 and How to Find Them.
Chris kicks things off by breaking down his "CODE" acronym that he uses for picking stocks – cheap, owner operator, disclosures, and excellent financial condition. He lists Brown & Brown as an example of one such company that checks all four boxes. And he shares a trucking company he likes because of its lower-than-average turnover rate. This leads to a conversation about the importance of management having skin in the game and why investors should mostly leave their portfolios alone. Chris then uses Monster Beverage as a case study for identifying a good company. (1:47)
Next, Chris talks about investor psychology. He says that it's difficult to hold stocks through large drawdowns and through periods of boredom, but that's how you can make a lot of money in the long term. Doing nothing is often the best thing you can do for your portfolio. Chris also covers how philosophy has influenced his investing style, the hidden opportunity in Swedish stocks, two specific Swedish companies that he likes today, and why you should always stick to your core principles – even if it means missing some winners along the way. (20:02)
Finally, Chris explains that staying true to your investment principles is hardest (yet also most crucial) when times get tough. It all comes down to knowing yourself, your risk tolerance, and what you're most comfortable investing in. Chris shares the names of two spun-off companies he's excited about today, as he expects a big surge in free cash flow for both. He clarifies that these are for holding long term rather than trying to make a quick buck. And Chris finishes with a discussion about why the recent tariff drama doesn't really matter. (39:26)
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
