According to Wikipedia, Warren Edward Buffett is “considered one of the most successful investors in the world and has a net worth of US$82.9 billion as of February 17, 2018, making him the third wealthiest person in the world.”. The Oracle of Omaha has earned a compounded annual gain in Berkshire Hathaway’s stock value per share of an amazing 20.9% by largely adhering to Benjamin Graham’s philosophy of value investing.

But even Berkshire isn’t immune to periodic (and painful) drawdowns. Here’s an excerpt from page 12 of the Berkshire Hathaway Inc. 2017 Annual Report:

“Berkshire, itself, provides some vivid examples of how price randomness in the short term can obscure longterm growth in value. For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic. Year by year, we have moved forward. Yet Berkshire shares have suffered four truly major dips. Here are the gory details:”

“There is simply no telling how far stocks can fall in a short period…your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.”

Although Maestro Capital Research’s Forte Strategy is based on a more nimble, swing position trading approach versus Berkshire’s long-term investment philosophy (by the way, MCR humbly and respectfully acknowledges our relative diminutive stature!), we share in common our persistent quest for maximized returns with minimized drawdowns. But as cliché and oft-repeated as it sounds, reward does not come without risk. The key to successful investing is to understand and accept that drawdowns are simply part of the game. Even the great Mr. Buffett acknowledges this. He continues:

“In the next 53 years our shares (and others) will experience declines resembling those in the table. No one can tell you when these will happen. The light can at any time go from green to red without pausing at yellow…That’s the time to heed these lines from Kipling’s If:

‘If you can keep your head when all about you are losing theirs . . .
If you can wait and not be tired by waiting . . .
If you can think – and not make thoughts your aim . . .
If you can trust yourself when all men doubt you . . .
Yours is the Earth and everything that’s in it.'”

Well said (and quoted), Mr. Buffett.