Monish Pabrai Post-Mortem on His Best Ever Investment – Teck Cominco (TCK)

I was lucky enough to get some notes on the 2010 Pabrai Funds annual meeting. I enjoy getting to learn through his experiences. Here are notes on his discussion of his investment in Teck Cominco:

The second business I want to talk about is Teck Cominco (TCK), which is now called Teck. Teck is a well managed company based in Canada, and is one of the largest miners in the world. You can think of it as the IBM (IBM) of mining. It's one of those stocks for widows to own. You hold it forever, with very solid, continuous and regular dividend streams, and solid growth over the years.

We invested in this stock right at the heart of the financial crisis in December 2008. We manage over $500 million in capital right now, but at that time in 2008, we were managing just $200 million. Teck was a situation where there was a slightly elevated risk of a loss, but an outsize return if we didn't have a loss.

This was a basket bet where I put about 2 percent of the assets into a number of different investments that were highly correlated. We invested about $4.4 million into Teck between the three funds. We bought at the absolute bottom of the financial crisis at $4.50 a share and I sold the last of it in the first quarter of this year for about $36 a share. We had about a 763 percent return, and we made about $38 million. It's the highest return we ever had in any investment in Pabrai Funds over the 11 years that we have existed.

Teck has copper, coal and zinc mines. It's one of the largest mining companies on the planet along with BHP, Rio and Vale. Teck is a low-cost producer and has some of the lowest cost mines on the planet. They are also a dominant miner of metallurgical coal. Metallurgical coal is fundamental to producing steel. Teck saw a huge opportunity in the growth of metallurgical coal demand over the years. Their thinking is probably right on.

One of the things I believe will happen is that we'll probably see the rise of at least 100 brand new cities if not more, over the next 20 or 30 years which will each have at least 5 million people. When you are going to build out 100 New Yorks in a 30-year period, you can't do that without steel.

There are particular nuances with met coal where it's not a commodity. For example, if you have a particular steel mill in China which uses coal coming from Canada, they can't switch it suddenly to using a coal coming from India without doing a lot of re-engineering through their furnaces and machinery.

There are some specific chemistry nuances with met coal. Metallurgical coal and iron ore are both chokepoints. Most of the iron ore going to China comes from two countries, Brazil and Australia, and little bit from India. They're the chokepoint in terms of China's ability to get iron ore. Metallurgical coal is the same way. The management of Teck saw a huge demand coming for metallurgical coal and they wanted to increase the metallurgical coal capacity.

Tech owned 60 percent of Fording Coal which has a very large metallurgical coal operation. They offered to buy the 40 percent they didn't own. The markets liked that deal. When Teck announced the deal to buy the rest of Fording, the acquiring stock price went up almost 20 percent. Teck's stock price went from $35 to $42 a share when the deal was announced.

This was very unusual. Normally when a company's making an acquisition, its stock price drops, and the target company's stock price rises. And Teck did something very unusual for the time. They did most of this deal with debt, and they did it with a one-year bridge loan. Because they wanted to get the deal done, they organized about ten billion in a one year bridge loan type facility to close the deal. They planned on going out to the debt and equity markets, and then raise debt through long term bonds to pay off the bridge loan and clean up the capital structure.

They closed the deal in 2008, but in the 2nd half of 2008 everything went downhill. Lehman Brothers goes bankrupt. There are no deals to be done on the debt market and the debt markets close. Suddenly, the markets start looking at the wall of debt that Teck has to pay back in 12 months. It clearly outstrips their cash flow, and at the same time, the commodity prices are in freefall.

The big concern was that if Teck could not handle their debt in a year, they would have to file for bankruptcy. Teck was looking at massive debt coming due. Within a year, all the commodity prices had collapsed. Their cash flow projections were out the window. The stock went from $50 a share to $4 a share in just a few months. That's when we started to first buy the stock.

On the balance sheet, Teck had a lot more assets than liabilities. They had a liquidity mismatch. They had enough assets to pay off all the liabilities, but those assets weren't liquid. The markets were concerned that when the debt came due, Teck wouldn't be able to pay the debt, and they would have to file for bankruptcy. When I looked at the whole thing, I thought that even if they filed for bankruptcy and even if they went through a bankruptcy reorganization, the equity would still have value because there was so much more in assets versus debt.

A similar situation happened recently with General Growth (GGP). General Growth is a very large mall operator. They have a huge amount of illiquid assets in their very valuable prime properties, but they didn't have the cash flows and the liquidity to service their debt. In General Growth's case, they went bankrupt, but when they came out of bankruptcy, the equity did not get wiped out. I saw the same thing in Teck. Even if they went bankrupt, I didn't see the equity being wiped out.

At the same time, I felt that the odds that Teck would file for bankruptcy were very small because they had many levers that they could pull. They could cut the dividend that they were paying. They had gold mines and other assets that they could start selling. They had some hedges in place so some cash flow was guaranteed. They had a whole bunch of assets they could sell piecemeal to different bidders. I also felt that they might see a little bit of a bump in commodity prices.

Finally, the top Canadian banks were holding the debt and they have no interest in running a mining company. The Canadian banks could do what has been done with a lot of the commercial real estate in the U.S. They extract a pound of flesh, and do what is known as "extend and pretend." The banks could go to Teck and give extensions on their debt with some higher fees, penalties and covenants.

I didn't think that the banks would push them into bankruptcy. I thought the banks would negotiate with them, and then commodity prices would lift from the severely depressed levels. If the company didn't go bankrupt, then this was a straight 5 to 7x gain. Teck's management executed brilliantly. They cancelled the dividend. They went through and sold a bunch of tertiary assets. They got the loan extensions from the banks. They issued equity to China Investment Corp. They juggled through a whole bunch of things over that one-year period.

As that overhang lifted, the stock pretty much started to go back to where it was, from under $5 a share to over $40 a share in ten months. The mid-$30 a share approaching $40 a share was pretty close to my assessment of what the business was worth. We held Teck for only 13 months. We held to get long-term gain, and then we were done.

William J. Ruane - The Making of a Superinvestor

William J. Ruane (1925-2005), founder and former Chairman of Ruane, Cunniff & Co. Inc., was an average student at school and had a hard time with engineering courses. He did not invent any earth-shattering original idea for value investing. By studying Benjamin Graham and recognizing the talent of his classmate, Warren Buffett, Ruane became a legend of value investing.

It is a classic case study that success in finance doesn’t require extraordinary talents. But Ruane did have the insight to clearly recognize a great idea: Berkshire Hathaway (BRK.A)(BRK.B). He also had the courage to back up the truck. Buying Berkshire Hathaway and riding it all along was perhaps the single best idea that turned an average student into a legendary investor.

If you take Berkshire out of Ruane’s portfolios, the track record would perhaps be less remarkable. This is the ultimate proof that you only need a few great ideas in a life time, and you don’t need an IQ beyond 125 to become a superinvestor. You do need, however, a religious belief in the power of the Graham-Buffett system and the discipline to follow through.

The Greatest Book on Research

When the late Bill Ruane walked into the annual meetings for the investors of his fund, his shining smile could brighten up the entire room. A year before his passing, I asked the legendary value investor to inscribe something in my 348^th copy of a limited printing of the 1934 edition of Security Analysis by Benjamin Graham and David Dodd. Ruane wrote: “To Brian: Enjoy the greatest book on research. Bill Ruane.” In his view, Graham’s "Security Analysis" is the Bible of Wall Street, the Old Testament.

The Fund Manager Recommended by Warren Buffett

In 1969, Warren Buffett was running out of things to buy. He knew that in every bull market Mr. Market gradually becomes used to paying more and more for a business -- and eventually the prices get so high that there just is no smart choice but to stay in cash and wait for the unavoidable crash.

The year 1969 was four years past the 1965 peak of the bull market that started in 1942, but the market was still overpriced, so Buffett stayed mainly in cash -- and his investors were getting restless. Some were voicing their disappointment that Mr. Buffett had been sitting mostly in cash for a long time and, as a result, they were not making the wonderful 20% plus returns of the past decade. They wanted him to invest. Now what? Should he pay more for a good business or fold the partnership? Would the market do what it had always done and crash, or somehow continue to defy “financial gravity?"

Buffett has always maintained that the only way to invest successfully is to buy wonderful businesses at attractive prices -- and if you can't, don't invest. Therefore, in 1969, he closed the partnership rather than violate the basic valuation principle of investing that had given him so much success.

At that point, many of the partners wanted to know who to invest with. Buffett told them that they could buy Berkshire Hathaway stock but not to expect him to do anything except wait for better opportunities. But if they wanted to be in the market, he recommended only one fund manager: William J. Ruane, manager of the Sequoia Fund. After management fees are subtracted, the Sequoia Fund returned 15.48 percent annually since inception from 1969 to 2007 compared with 11.68 percent for the S&P 500 during the same period.

A Mechanical Idiot Went to Harvard

William John Ruane was born on Oct. 24, 1925, in a middle class neighborhood in Chicago, and grew up in the suburb of Oak Park, Ill., where he attended Catholic schools and was an average student. He graduated from the University of Minnesota in 1945 with a cum laude degree in electrical engineering. He immediately joined the Navy and was on the way to Japan when World War II ended.

After the war, he worked briefly for General Electric (GE), only to discover that he disliked engineering. "I'm a mechanical idiot," he told Forbes in 1999.

He enrolled at Harvard Business School and found his calling when a professor urged his class to read the classic textbook ''Security Analysis: Principles and Techniques" (1940), which helped him to focus his interest. Although he knew nothing about stocks, he was impressed with the approach authors Benjamin Graham and David Dodd took to financial analysis. After graduating in 1949, he went to work for Kidder Peabody, where he remained for almost 20 years.

Mr. Ruane recalled interviewing with a Wall Street investment firm and being told that college graduates were paid $35 a week, while Harvard Business School graduates were paid $37.50. ''And there you have the value of a Harvard Business School degree in 1949," he remarked in 2004. ''Things have changed."

Meeting Warren Buffett

In 1950, Ruane and Buffett sat in on a class Benjamin Graham taught at Columbia University, where they learned that the quality of earnings was just as important as growth in earnings.

Ruane and partner Richard T. Cunniff founded their investment management firm in 1969 after raising $20 million from investors. Most of their customers came to them on the recommendation of Warren Buffett, Ruane's former classmate and a close friend.

Bill Ruane was a phenomenally successful career man and an even more remarkable human being. Bill approached his philanthropic work with the same keen intelligence, meticulous attention to detail, concern for others, and wonderfully easygoing humor that he brought to the business world. He also funded an "Accelerated Reader" program for 26 New York public schools and for 19 schools in Monroe, La., as well as schools on reservations.

Mr. Ruane applied business principles to the project, giving people bonuses for positive changes in their lives. He bet one man $250 that he could not stop smoking, and was happy to lose the wager. One day each summer, he provided a small carnival with rides on the street, including pony rides.

Four Key Elements of Ruane’s Success

Reading through Bill Ruane’s paper trails, we can come up with four key components that could explain his success:

1. Keen Intelligence

2. Meticulous Attention to Detail

3. Concern for Others

4. Wonderfully Easygoing Humor

Ruane’s Four Rules of Smart Investing

During a class he taught at Columbia University, Ruane laid out the four rules that guided his investment career:

1. Buy good businesses. The single most important indicator of a good business is its return on capital. In almost every case in which a company earns a superior return on capital over a long period of time it is because it enjoys a unique proprietary position in its industry and/or has outstanding management. The ability to earn a high return on capital means that the earnings which are not paid out as dividends but rather retained in the business are likely to be re-invested at a high rate of return to provide for good future earnings and equity growth with low capital requirement.

2. Buy businesses with pricing flexibility. Another indication of a proprietary business position is pricing flexibility with little competition. In addition, pricing flexibility can provide an important hedge against capital erosion during inflationary periods.

3. Buy net cash generators. It is important to distinguish between reported earnings and cash earnings. Many companies must use a substantial portion of earnings for forced reinvestment in the business merely to maintain plant and equipment and present earning power. Because of such economic under-depreciation, the reported earnings of many companies may vastly overstate their true cash earnings. This is particularly true during inflationary periods. Cash earnings are those earnings which are truly available for investment in additional earning assets, or for payment to stockholders. It pays to emphasize companies which have the ability to generate a large portion of their earnings in cash. Ruane had no taste for tech stocks. He stressed the importance of understanding what a company’s problems might be. There are two kinds of depreciation: 1. Things wear out. 2. Things change (obsolescence).

4. Buy stock at modest prices. While price risk cannot be eliminated altogether, it can be lessened materially by avoiding high-multiple stocks whose price-earnings ratios are subject to enormous pressure if anticipated earnings growth does not materialize. While it is easy to identify outstanding businesses it is more difficult to select those which can be bought at significant discounts from their true underlying value. Price is the key. Value and growth are joined at the hip. Companies that could reinvest at 12% consistently with interest rate at 6% deserve a premium.

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Brian Zen, PhD, CFA, is founder of Zenway Group, a New York-based investment advisory firm that provides family wealth creation coaching programs and tutoring services to children and their parents. Through newsletters, family learning parties, face-to-face tutoring and online classes, Zenway-certified Financial Tutors teaches children the craft of investing and helps their parents to grow family wealth. Dr. Zen appreciates your questions and feedback at: info (at) zenway.com.

30 of Charlie Munger's best quotes

I never get tired of Munger. Not always politically correct but a wealth of knowledge if we pay attention. If I read this list to start every day I'd make a lot fewer investing mistakes. I guarantee it.

Spend each day trying to be a little wiser than you were when you woke up.

In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero.

Choose clients as you would friends.

The best armour of 0ld age is a well-spent life preceding it.

When you borrow a man’s car, always return it with a tank of gas.

If only I had the influence with my wife and children that I have in some other quarters!

Take a simple idea and take it seriously.

In business we often find that the winning system goes almost ridiculously far in maximizing and or minimizing one or a few variables — like the discount warehouses of Costco.

Don’t do cocaine. Don’t race trains. And avoid AIDS situations.

We look for a horse with one chance in two of winning and which pays you three to one.

You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.

It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.

A great business at a fair price is superior to a fair business at a great price.

All intelligent investing is value investing — acquiring more than you are paying for.

You must value the business in order to value you the stock.

No wise pilot, no matter how great his talent and experience, fails to use his checklist.

There are worse situations than drowning in cash and sitting, sitting, sitting. I remember when I wasn’t awash in cash — and I don’t want to go back.

…it never ceases to amaze me to see how much territory can be grasped if one merely masters and consistently uses all the obvious and easily learned principles.

Once you get into debt, it’s hell to get out. Don’t let credit card debt carry over. You can’t get ahead paying eighteen percent.

If you always tell people why, they’ll understand it better, they’ll consider it more important, and they’ll be more likely to comply.

Spend less than you make; always be saving something. Put it into a tax-deferred account. Over time, it will begin to amount to something. This is such a no-brainer.

You don’t have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time.

Three rules for a career: 1) Don’t sell anything you wouldn’t buy yourself; 2) Don’t work for anyone you don’t respect and admire; and 3) Work only with people you enjoy.

I won’t bet $100 against house odds between now and the grave.

I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge.

…being an effective teacher is a high calling.

I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart…

Without numerical fluency, in the part of life most of us inhibit, you are like a one-legged man in an ass-kicking contest.

In my life there are not that many questions I can’t properly deal with using my $40 adding machine and dog-eared compound interest table

Charlie Munger: "The Accountants Utterly Failed Us"

A recent build up of articles on GuruFocus.com has convinced me to re-read and re-listen to anything I can find in the library or on the internet that focuses on the man whom I personally consider my role model, Charlie Munger (vice chairman of Berkshire Hathaway). As most know, Charlie is not one to hold back from letting his opinion be known (a good counterbalance to the Dale Carnegie-like demeanor of his partner, Warren Buffett). During a two hour interview with CNBC anchor Becky Quick, which took place at the University of Michigan in September 2010 (see link below for video), Charlie had some interesting thoughts and revelations from his own personal experience about both life and business for the next generation of college graduates soon to enter the workforce.

One issue that Charlie discussed was the importance (or lack thereof) that accountants (“the adults” as he calls them) played during the recent crisis. Not one to disappoint, Charlie was blunt and critical of the role they played: “The accountants utterly failed us; and by the way, there is practically no sign of any intelligent reversal of the failure of that profession.”

Charlie, as a rational and intelligent person and businessman, understands the importance of incentives (“Never, ever, think about something else when you should be thinking about the power of incentives.”), and the perverse effects that they can have when not properly aligned. As he notes in the speech when talking about the ridiculous premise of mark-to-market accounting used by Enron, the people who were going to the SEC (which is led by accountants) and suggesting these accounting rules were the same people who were going to be purposely misusing and looking to profit from these rules. “How could anybody have any respectable understanding of human nature without realizing that the kind of people who were going to be tempted by that accounting were not going to be able to resist the temptations? It was disgusting. And they’re [the accountants] not ashamed yet.”

When asked how this can happen, Charlie reverts back to a basic premise in the understanding of human nature: “Partly, the establishment accountants want to please the people who are writing the checks, and partly the academic accountants get full of people who overdosed on mathematics. And they want everything to be in balance, and they don’t think ‘that really isn’t rational when creating rules for a human behavioral system’. They’re too mathematical and not rational enough when dealing with their fellow humans. You cannot give the average Wall Street CEO really lenient standards of accounting and expect the figures to be good. The accountant is like the referee in soccer… they have to be the adults that prevent the mayhem. They don’t want to be the adults… but it is their duty under god and they failed us miserably.”

As Becky Quick is quick (no pun intended) to note, where does the Wall Street CEO fall into this equation? Are they inherently bad people who won’t follow the rules unless someone is there to put them in their place? Charlie’s response highlights the typical qualities of a CEO: very competitive and aggressive at accomplishing what they want to do. “They can’t help themselves, they’re that competitive”, as Charlie puts it. The blind recreation by leaders of what the CEO in the building next door is doing has been thoroughly discussed by Warren Buffett. He calls this the institutional imperative (first discussed in the 1989 annual report), the drive to follow the path of the other guy, regardless of the potential consequences of that subsequent action. Unfortunately, little has changed in regards to this habit by CEO’s over the past 20+ years.

However, this is not a justification for their behavior. As Charlie notes, he does not think is a productive quality to have: “I don’t believe in being that competitive”. Regardless of his personal thoughts on CEO’s, he retorts back to his original viewpoint: “You can’t blame the miscreants as much as you can the adults whose duty it was to prevent the miscreancy… You can’t blame the tiger for behaving like a tiger; you have to have a gamekeeper.”

I personally agree with Charlie, but think that the “tiger” is let off to easily in these situations. Unfortunately, the “gamekeeper” is often trailing the accounting gimmicks, and is left playing a game of catch up with Wall Street firms “creativity”. The blame for this can easily be placed on the accounting police, but completely avoids a fundamental flaw in the equation: the incentive for firms to continue with accounting gimmicks. As far as I am concerned, accounting fraud needs to become a much bigger issue, and be appropriate punished based on the corporate malfeasance being committed. David Einhorn, the President of Greenlight Capital, highlighted this during a recent interview with Charlie Rose. “After Enron you had Sarbanes-Oxley, and there have been hardly any prosecutions under it. You put in a tough anti-fraud law. The CEO has to sign there is no fraud. The CFO has to sign that the financial statements are correct. If not, there are going to be criminal consequences....But then they didn't enforce it. Once the bad guys figured out that the law wasn't being enforced, it effectively provided cover, because everybody said, ‘Look, we have the tough anti-fraud law. The fraud must have gone away’.”

In my opinion, this is the key issue. Accounting standards certainly need to be set to prevent accounting tricks on financial statements (to the extent this is possible). Beyond that, executives need to be given a serious disincentive for lying and cheating, which I believe starts with stronger criminal consequences for white collar business crime. Until that time, there is no reason to believe that executives will stop pulling any strings necessary to report phony earnings increases which keep investors happy and lead to larger bonus checks at the end of the year.

Link to video: _http://rossmedia.bus.umich.edu/rossmedia/SilverlightPlayer/Default.aspx?peid=4d215177cbe44b1e8e94d0dd68f5058f

Buffett Loses to Desmarais as Power Exceeds Return

July 30 (Bloomberg) -- Deep among the pine forests of rural Quebec lies a private estate the size of Manhattan, a refuge where French President Nicolas Sarkozy has gone to relax.

Former U.S. Presidents George H.W. Bush and Bill Clinton have played golf here, on 18 meticulously groomed holes with a bright-yellow cottage for respite at the 13th tee. Pheasant shoots are orchestrated from the hunting lodge; opera is performed in the music pavilion. An original of Auguste Rodin’s The Thinker and a statue of Thomas Jefferson adorn the rough, granite hills.

At the heart of the property is a grand residence surrounded by formal gardens called Cherlieu -- which means beloved place -- that’s modeled on a 16th-century Palladian villa. This is the home of Paul Desmarais Sr., a white-haired, Canadian billionaire whose obscurity outside Quebec masks his family’s vast connections and influence in global business and politics.

“They keep a very low profile,” says Brian Mulroney, who met Desmarais in 1965 and, as Canada’s prime minister from 1984 to 1993, introduced him to President Ronald Reagan and Bush. “That’s the way they like it.”
link

Interview With Precious Metal Guru Eric Sprott - Still has 90% of Personal Money in Precious Metals

 follow the observations of Sprott Asset Management and also own shares of Sprott Resource Corp which I have written about here:

http://valueinvestorcanada.blogspot.com/search/label/Sprott%20Resource%20Corp

It is hard not to pay attention to Sprott whose hedge fund is up 23% annualized over the last decade, much of that owing to an early call on both gold and the financial problems in the United States.

On the Sprott website is a recent interview where Eric Sprott suggests that silver is now the investment of choice. I'm more of an oil man myself, but I don't think it is ever a mistake to at least listen to the opinions of someone who has either been very good or very lucky for an extended period of time.

Warren Buffett In His Own Words: 23 Timeless Quotes on Investing

Warren Buffett is the most successful investor of our time, perhaps of any time. He is famous for his pithy and witty quotes, which often appear in his annual letter to shareholders.

When strung together, his quotes pretty well sum up his investment philosophy and approach.

Here are my picks for his best sound bites of all time on being a sensible investor. I would invite readers to use the comments feature to offer their favorite Buffett quotes.

1. Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
   
2. Investing is laying out money now to get more money back in the future.
   
3. Never invest in a business you cannot understand.
   
4. I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
   
5. I put heavy weight on certainty. It's not risky to buy securities at a fraction of what they're worth.
   
6. If a business does well, the stock eventually follows.
   
7. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
   
8. Time is the friend of the wonderful company, the enemy of the mediocre.
   
9. For some reason people take their cues from price action rather than from values. Price is what you pay. Value is what you get.
   
10. In the short run, the market is a voting machine. In the long run, it's a weighing machine.
    
11. The most common cause of low prices is pessimism. We want to do business in such an environment, not because we like pessimism, but because we like the prices it produces. It's optimism that is the enemy of the rational buyer. None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling.
    
12. Risk comes from not knowing what you're doing.
    
13. It is better to be approximately right than precisely wrong.
    
14. All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.
    
15. Wide diversification is only required when investors do not understand what they are doing.
    
16. You do things when the opportunities come along. I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.
    
17. What we learn from history is that people don’t learn from history.
    
18. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.
    
19. You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.
    
20. You should invest in a business that even a fool can run, because someday a fool will.
    
21. When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
    
22. The best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago.
    
23. Diversification may preserve wealth, but concentration builds wealth.