Interview with Steve Forbes: Jim Oberweis

I am watching the interview of Jim Oberweis, the President of Oberweis Asset Management. Some of the things Oberweis says run counter to my investment philosophy. I was also struck by some of his stock picks which were “unfaithful” to his investment philosophy.

While talking about how he finds investments, Oberweis talks about what he looks for in a stock.

We look for companies that are growing faster than 30%. We look for sustainable barriers to entry, and we look for stocks that are reasonably priced.

Soon Forbes mentions that Oberweis is invested in Opentable (OPEN). Opentable is a  company that offers real-time restaurant reservation service. Does Oberweis think that Opentable has sustainable barriers to entry ?

As you probably know, Google bought Zagat, and that has kind of, I think, made everyone on edge – that maybe Google’s planning to give away the system. You know, it could happen. I haven’t seen a lot of evidence to it right now.  So far, Google’s just talking about continuing on the partnership with OpenTable and helping expand that relationship.

That could change, we’ll certainly watch that. What has happened in OpenTable, and the only tangible data is that lots of restaurants went out of business during the last few years. And as restaurants go out of business, as you can imagine, there’s a cost to OpenTable in terms of hardware and software.

That I would assume means “no”. Oberweis thinks that Google can easily change the dynamics of the industry. I would not say that this qualifies as “sustainable” barrier to entry.

The conversation soon turns quite interesting. It seems that Oberweis stays fully invested. These are his reasons.

You know, it would be great to be able to time the market and to know what the cycles will bring. It’s really hard.

But if you take a much more realistic viewpoint that the market fluctuations are very, very hard to predict and that we won’t be successful in predicting overall market fluctuation – so many people looking at all the same data. Then the natural conclusion is that you should stay fully invested all the time because over long periods of time, we do know that corporate earnings increase over time and that stocks do go up over time.

The people who are really successful, the Warren Buffetts of the world, have done so by buying businesses and doing it at an appropriate time. We’re trying to do the same thing in our portfolio.

Being fully invested is not a “natural conclusion” of the fact that corporate earnings increase over time and the stocks go up and it is almost impossible to time the market. It is good that Oberwies mentions Buffett and the fact that he is doing the “same thing” because Buffett disagrees with his viewpoint.

The stock market is a no-called-strike game. You don’t have to swing at everything–you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum!’ – Warren Buffett

To make the strike at the right pitch, you will need to have the capital lying around. If you are always fully invested then you will have to sell something to buy something else. When the market tanks – selling something to buy something else is not a great strategy. And it is obvious that the best deals are found when there is panic all around.

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