Philip Carret’s background

Philip Carret had 13% average annual returns for 55 years!

Like Walter Schloss, he had an unbelievable track record over a long period of time. Neither of them ever had the best returns in terms of a single year or two, but over a longer period of time they were among the best investors ever.

Philip Carret’s best investment

He bought a sugar company’s stock for $1.5 and it went all the way up to $200. The question is how many shares he bought.

Philip Carret’s strategies for value investing

Philip Carret was a master at going through annual reports, especially balance sheets. He could quickly see if a company was unattractive (he would buy companies that were undervalued relative to their assets).

Tips from Philip Carret on value investing:

• Review your portfolio every six months.
• If you have lot of capital, or manage a fund, put 50% in safe assets.
• Keep about 10% of the portfolio in call options, so as not to miss the best companies, so-called quality companies, as Philip Fisher would say.
• The opposite also applies: If you think the cycle has gone very far, and you have a lot of companies that have become overvalued, then sit on 10% put options.
• Yield (the inverse of P/E) is the least accurate measure.
• Take your losses quickly, but feel free to sit on your winners longer than you think you should.
• Don’t rely mechanically on valuation formulas (such as: contemporary ratios, famous books’ valuation formulas, or default choices from screening tools like Yahoo, google finance or your broker’s app…etc).
• At the same time, he had his own rules.

Philip Carret’s Two Coolest Investments:

(1) Magma Power: An energy company protected by California law. No competitors could come within their territory.

(2) National Bridge Company: A company that owned all the land and real estate under a popular area where many tourists came every day, in the state of Virginia.

These are archetypal value investments.

Quotes from Philip Carret

“Instinct is much more reliable than statistics.”

“One deviates from business principles at his own peril. There are a few who are smart enough to do it, but they are few and far apart.”           

“I like strong balance sheets. I get floods of annual reports and look at them only briefly.”

If I see that the equity ratio is low, or current ratio is low, I don’t go further. I want no term debt, and a better than 2-to-1 current ratio. “

Philip Carret’s special interest:

He liked to look for lunar eclipses.

Read on: About the strategies of other famous value investors.