Gary Channon, a prominent UK value investor known for his concentrated investment approach, dives into intriguing topics. He discusses his rigorous strategy of buying undervalued stocks, ensuring he independently monitors business performance. Channon shares insights on integrating AI into investment processes, predicting a shift in analyst roles. His thorough preparation for management interviews, involving hours of research, reveals his commitment to informed decisions. The power of real-time observation in validating investments and the dynamics of the evolving pharmaceutical landscape also feature prominently.
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question_answer ANECDOTE
Gary’s Early Investing Anecdote
Gary Channon started investing as a child with very small amounts of money.
He turned £50 into nearly £2,000 by investing in a company before discovering it was a fraud.
insights INSIGHT
Investment Focus on Moats
Gary’s framework for evaluating a business focuses on intrinsic value and return on capital.
He looks for durable competitive advantages, or moats, that sustain high returns on capital.
insights INSIGHT
Low-Cost Producer Equals Pricing Power
Pricing power can arise from being the low-cost producer, not just from monopoly or brand.
Control of economics, even by cost leadership, is a powerful form of pricing power.
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In this book, Daniel Kahneman takes readers on a tour of the mind, explaining how the two systems of thought shape our judgments and decisions. System 1 is fast, automatic, and emotional, while System 2 is slower, effortful, and logical. Kahneman discusses the impact of cognitive biases, the difficulties of predicting future happiness, and the effects of overconfidence on corporate strategies. He offers practical insights into how to guard against mental glitches and how to benefit from slow thinking in both personal and business life. The book also explores the distinction between the 'experiencing self' and the 'remembering self' and their roles in our perception of happiness.
Buffett
The Making of an American Capitalist
Roger Lowenstein
This book provides a comprehensive and detailed account of Warren Buffett’s life, from his early days to his ascension as one of the most successful investors in history. Written by Roger Lowenstein, the book is based on three years of research and includes interviews with Buffett’s family, friends, and business associates. It explores Buffett’s investment strategies, his long-term philosophy of buying undervalued stocks, and his role in transforming Berkshire Hathaway into a highly successful corporation. The book also delves into Buffett’s personal life and the influences that shaped his investment approach, including his mentor Benjamin Graham and his partnership with Charlie Munger.
Gary Channon is one of the UK’s better known valueinvestors. He runs a value fund, a closed-end fund and a private equity vehicle. He runs a highly concentrated portfolio. The top 5 positions are over 50%, and he holds no more than 15 stocks.
I asked him on the podcast because he is really thoughtfulabout his process – he only buys stocks selling for <50% of intrinsic value, and if he can monitor the business performance independently of the companycommunications. He is then prepared to hold them for extended periods, as long as they remain cheap.
His framework for evaluating a stock includes parameterslike the depth of work completed and confidence levels, he has instructed his entire research team to become AI experts and he has already seen significant benefits; he thinks AI means sellside analysts will be more or less gone in twoyears; and we talked about his techniques for interviewing management which include spending 4-6 hours preparing for a 1 hour meeting.
Behind the Balance Sheet 
