The Seven Immutable Laws of Investing

GMO

James Montier

Article

1 Pages

The authors defend disciplined value investing amid the technology-driven exuberance of 2000. Drawing on James Montier’s seven investing laws, they emphasize valuation, patience, contrarian thinking, limited leverage, understandable investments, and protection against permanent capital loss rather than chasing short-term market enthusiasm.

Key Takeaways

Margin Of Safety: Fortune’s 10 stock portfolio turned $100 into $30 over 10 years after beginning with an average P/E of 347x.
Bonds Looked Expensive: GMO estimated fair value for 10 year Treasury yields at 4.5% to 5%, versus the prevailing 3.5% yield.
Risk Has Three Sources: Montier identifies 3 primary threats to capital: excessive valuation, weak fundamentals, and financing risk created by leverage.
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