Building The Perfect Portfolio (Curtis Montgomery) 2 comments

Those familiar with the Singapore investing scene would have heard of Curtis Montgomery, also known as Professor Sage on the popular investing website Wallstraits.com. Sage, as I will call him, is known for emulating the style of the original Sage of Omaha, Warren Buffett himself, significantly outperforming the STI over the years 2001-03, and in the process amassing a bunch of followers who have even paid up to subscribe to his member-only Intellivest forum.

Building The Perfect Portfolio is the second of Sage's four pocket-sized books on investing so far, and in my opinion is one of the more informative and useful of the four, for the investor who is seeking a systematic way of screening stocks, to learn to make intelligent buy and sell decisions, and to develop a general investment philosophy. These issues are covered in detail in the book, through specific chapters on the Wallstraits 8 Business Screens (Chapter 3), When to Buy a Stock (Chapter 4), When to Sell a Stock (Chapter 5), and investment strategies/philosophies through Chapters 6 to 8.

Actually, any book covering Buffett's investment strategies would probably do just as well in outlining the investment approach. There is the same emphasis on anti-diversification in portfolio stock allocation, on selecting stocks based on a similar fundamentals-based GARP (Growth At a Reasonable Price) and distress-buying approach, and on a similar fundamentals-based stock selling strategy. There is even a chapter explaining the misunderstood buy-and-hold strategy which Buffett has espoused over the years. Probably the main point on which both differ is on the dividend issue: Buffett believes in capital re-investment by the company in place of dividends provided there are good opportunities, Sage seems to think dividends are preferable.

Let's think about the half-full part of the glass instead of the half-empty portion; Sage's book is as good a book as any in covering Buffett's general approach, and that is enough in itself: for any greenhorn investor, the best thing he could do to himself is to read a book on Warren Buffett's methods and internalise the philosophy that it is the business that matters, not the stock price. In addition, Sage has adapted the approach to the Singapore market and sprinkled local examples across the book, mostly based on his personal experiences on the SGX. The reader will find frequent mention of core Wallstraits holdings, in particular Osim, United Food and People's Food, and can also take a peek at the Intellivest portfolio on Page 164. (Since that is published material I guess it's ok to list down here: stocks like Celestial, Beauty China, Sunray, TSM (what's that?), Boardroom, JEL, Hongguo, Hersing, United Food, Osim, People's Food and Want Want - FYI). In addition, there are also descriptions of investing philosophies of other successful investors, in particular Peter Lynch, John Neff, Philip Fisher and of course Benjamin Graham. Of course, the common thread running through is the emphasis on business fundamentals.

The stock market is about investor psychology/sentiment/emotions as much as business fundamentals, and Sage recognises as much in the book. Investor psychology is covered in his later book (the 3rd). In truth one can't predict market psychology the way one can at least get a feel for business fundamentals; the former dictates the short-term; reversion to the mean ensures that the latter dominates the medium/long-term. Sage's book covers a viable and logical business fundamentals-based approach, and although some of his picks have not done well these two years (2004-05) I do not doubt that over the long term he is likely to perform better than most investors.