====== John McGee ======
John McGee is a highly successful but relatively low-profile American [[value investor]] known for his purist, no-nonsense approach to managing money. A protégé of [[T. Rowe Price]], McGee later founded his own firm and quietly compiled an extraordinary track record, primarily by following the bedrock principles of [[Benjamin Graham]] and [[Warren Buffett]] to their logical extremes. His investment philosophy, most famously detailed in an article titled //"Confessions of a Value Investor,"// centers on a fiercely concentrated [[portfolio]], an exceptionally long-term holding period, and a profound understanding of a handful of businesses. For McGee, investing isn't about predicting market swings; it's about being a patient, disciplined part-owner of excellent companies purchased at a significant discount to their [[intrinsic value]]. He represents a powerful, unfiltered version of value investing in action.
===== The McGee Philosophy: A Deep Dive =====
McGee’s approach can be distilled into a few core, interconnected principles. These ideas stand in sharp contrast to the strategies followed by most of the investment management industry.
==== Concentration is Key ====
While most financial advisors preach the gospel of [[diversification]], McGee considers it a defense against ignorance. He famously argued that holding more than a dozen stocks means you likely don't know enough about any of them. His strategy involves building a portfolio with as few as five to ten holdings.
This intense concentration has two powerful effects:
  * **It forces discipline:** When you can only own a few companies, you scrutinize each potential investment with extreme care. You must have unshakable conviction.
  * **It magnifies results:** When you are right, the impact on your overall returns is massive. Of course, the risk is that it also magnifies your mistakes, which is why the research must be so thorough.
This is the polar opposite of a typical [[mutual fund]], which might hold hundreds of stocks, ensuring its performance will never stray too far from the market average. McGee doesn't want to be average; he wants to be excellent.
==== Think Like a Business Owner, Not a Trader ====
McGee buys a [[stock]] with the same mentality as someone buying an entire private company. He isn't interested in what the stock price will do next week or next quarter. He is interested in the long-term earning power of the underlying business. This means focusing on:
  * **Business Economics:** Does the company generate high returns on capital? Does it have pricing power?
  * **Durability:** Does the business have a sustainable [[competitive advantage]] (or [[moat]]) that will protect it from competitors for decades to come?
  * **Management:** Are the leaders of the company skilled, honest, and working for the shareholders?
By thinking like an owner, he can patiently hold through market downturns, knowing that the business's intrinsic value remains intact.
==== The Power of Patience and Discipline ====
Perhaps McGee's greatest strength is his incredible patience. He likens investing to baseball's Ted Williams, who famously divided the strike zone into 77 baseballs and only swung at pitches in his "sweet spot."
McGee is willing to hold large amounts of cash for years if he cannot find an investment that meets his strict criteria within his [[circle of competence]]. He completely ignores the pressure to always "be invested." He waits for [[Mr. Market]], in a fit of panic or pessimism, to serve up a fat pitch—an outstanding business at a ridiculously cheap price. This discipline is what separates true investors from speculators.
===== Practical Takeaways for Everyday Investors =====
While running a five-stock portfolio might be too nerve-wracking for most, McGee's philosophy offers timeless wisdom for any investor.
  * **Don't Mistake Activity for Achievement:** Resist the urge to constantly tinker with your portfolio. Often, the most profitable action is inaction. Let the magic of [[compounding]] do the heavy lifting over many years.
  * **Focus Your Research:** Instead of trying to follow 50 companies, try to become a genuine expert on 10 or 15. A smaller, well-understood portfolio is often superior to a sprawling, poorly understood one.
  * **Build a "Hold" Muscle:** When you find a great company, your default decision should be to hold it. Don't sell just because the price went up. Sell only if the business fundamentals have deteriorated, you've found a dramatically better opportunity, or the valuation has become truly absurd.
===== Why He Matters =====
John McGee is a crucial figure for value investors because he is a purist. He reminds us that the principles laid out by Graham and perfected by Buffett are not just academic theories; they are a practical, albeit demanding, blueprint for building serious wealth. In a world obsessed with speed, complexity, and short-term results, McGee’s simple, patient, and concentrated approach is a powerful antidote and an enduring source of inspiration.