Invest like a legend: Kim Shannon

Invest like a legend: Kim Shannon

HOW I WOULD INVEST A $100,000 WINDFALL: I love giving 500-year-old investment advice from a German banker called Jacob Fugger the Rich: Keep one-quarter each in stocks, bonds, real estate and gold coins. Gold coins were the currency of his day. In modern-day terms, he’s talking about T-bills. What he’s telling you is to dynamically rebalance—sell asset-mix winners and buy asset-mix losers. All sorts of studies show the more you dynamically rebalance, the better your long-term returns. It sounds easy, but it’s incredibly difficult to do.

BIGGEST OPPORTUNITY NOW: I’m a bottom-up Canadian stock picker. I find it fascinating that a large number of the cheapest stocks in my model are oil and gas stocks—even what I would call the grand dame of Canadian oil and gas integrateds: Imperial Oil.

BEST INVESTMENT: Seth Klarman’s 1991 book on asset allocation, Margin of Safety. I bought it when it was published in Canada for $26.95. It’s been selling on eBay for more than $1,300. He owns the copyright and won’t allow it to be republished. It’s been stolen out of every library it’s ever been in.

WORST INVESTMENT: It’s a toss-up—there are so many. Believing the CFO at Royal Trust that everybody misunderstood the stock. I bought it at $5 and sold it at $3. I consider that a big win, actually. Laidlaw—I bought it at $4 and sold it at $1. I’m a value investor. You buy them when they’re cheap and sell them when they’re cheaper, sometimes.

WHAT KEEPS ME AWAKE AT NIGHT: I sleep well, actually. What I am concerned about, however, is the new mania for what is essentially tactical asset allocation and passive management. I call it dumb money. More than half of trading now is due to index futures and index ETFs. There are fewer people differentiating between quality and junk, so stock prices are becoming less and less anchored by reality.

ADVICE FOR INVESTORS: If you’ve bought cheaply, and you’re patient, you will create wealth in the long run, especially if the stock has an income component.