Thursday, October 30, 2008

'Merchandise Well Bought...'

It is an understatement to say that October was a challenging month to be an investor. Or to have an investment portfolio. It was the market's worst month in 21 years. It was a month when, as my blog post earlier this month notes, the 201(k) became the new 401(k).

Warren Buffett certainly got deserved kudos for trying to buck up the beleagured investor class with his Oct. 17 New York Times op-ed, titled "Buy American. I Am." In it, he sets forth a piece of investing advice that he is famous for — "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."

As we get set to start a new month, in which we can all hope to make up some of the fearsome losses of October, let me share with you another piece of investment wisdom that I think should be as top of mind as Buffett's.

It comes from John Neff. Neff is not in the godlike pantheon of Buffett, but he is an investment Hall of Famer by any measure for his long tenure at Wellington Management Co. running the Windsor Fund. If you have not read his book, John Neff on Investing [John Wiley & Sons], put it on your must-read list. It is an investment primer deserving close study, particularly for investing in treacherous times when markets are going against you in a big way, as they often did for Neff with his contrarian stance.

I spent some good time with Neff in the past. He was one of the historians I interviewed for the Directors & Boards special 25th anniversary "An Oral History of Corporate Governance" edition published in 2001. Neff achieved his superstar portfolio manager status with a splash of activist shareholder as part of his playbook. He then became a corporate director to top off his impressive career.

Now to Neff's piece of wisdom that can go toe-to-toe with Buffett: "Merchandise well bought is well sold."

There seems to be a lot of merchandise on sale right now. Is it time to buy? Maybe Neff's guidance will apply — to individual shareholders, institutional investors, and dealmaking CEOs and boards. Think of how these current prices will change a year or two, or more, down the road. Will you be muttering to yourself, "If only I had pulled the trigger?"