Introducing the Punchcard Investing Watchlist
The Punchcard Investing Watch List has been initiated and can be found here. It includes the first 3 moat companies we have looked at. The four factors refer to the four factors Buffett and Munger use to evaluation companies. Buffett wrote in his 1977 letter to shareholders: “We want the business to be (1) one that we can understand, (2) with favorable long‐term prospects, (3) operated by honest and competent people, and (4) available at a very attractive price.”
One of the goals of this blog is to put together a watchlist of high quality, wide moat companies that pass these Buffett filters. This way when of these stocks becomes cheap, we are prepared to pounce.
The always excellent Manual of Ideas articulated the reasoning behind this approach better than we can:
(Those) who seek to invest in great businesses at reasonable prices have built up watch lists of such businesses, tracking the width of their competitive moats over time. This is not a quantitative process but rather a matter of ongoing judgment. Buffett must have felt the monopolistic pricing power of local newspapers start to erode quite a bit before their financials removed any doubt that major changes were afoot in the media landscape. Similarly, those who have followed cable operators for a long time must be growing ever more concerned about the evolution of their competitive position vis-à-vis Internet-based video. On the other hand, investors who have followed U.S. railroads for a long time probably started seeing major improvement in railway economics quite a bit before the rest of the investment community caught on. As such, an investment process that relies on knowledge accumulation over time can deliver an edge in judgment at key inflection points in the attractiveness of certain companies or industries. Such an edge may be less available to those who focus on screening-based deep value approaches.