Embracing Patience Over Performance: A Conversation on Robert G. Kirby’s Investment Wisdom
In an investment landscape dominated by market noise and rapid shifts, Robert G. Kirby’s essays, “The Coffee Can Portfolio” and “More Than Numbers,” stand out as timeless manifestos for long-term, value-based investing. Written decades ago, these works by Kirby challenge both the speculative tendencies and the short-term metrics that often skew institutional money management today. His insights, rooted in fundamental principles, are not just a refreshing reminder but a roadmap for building real, enduring wealth. Join us as we explore these ideas through a conversation between two investors, Sara and Shawn, who dive into the core lessons Kirby presents for modern investment professionals.
Sara: Shawn, have you read Robert Kirby’s articles, The Coffee Can Portfolio and More Than Numbers? They’re classics, but what’s incredible is just how relevant they feel today.
Shawn: Absolutely, Sara. Kirby’s insights truly cut through the noise. The Coffee Can Portfolio is especially powerful, with its case for high-conviction, low-turnover investments. His idea of picking quality stocks and “locking them away” contrasts sharply with the way most of our industry operates today.
Sara: Right! It’s a radical approach. Kirby essentially argues for selecting a diversified group of high-quality stocks, investing in them with deep research and conviction, and then letting them grow without interference. It’s like his idea of an old-fashioned coffee can hidden under the mattress, safe from market whims. His goal is to avoid the “frictional drag” of frequent trading costs and short-term adjustments, which erode returns over time.
Shawn: Yes, and Kirby critiques both traditional indexing and hyperactive management styles. He’s wary of the way many “index funds” are managed, pointing out that the S&P 500 undergoes changes constantly, which adds transaction costs and can distort its market representation. Kirby instead suggests a true “hands-off” portfolio approach, where the stocks are left untouched to allow compounding to do its magic. By reducing turnover, he believed investors could preserve returns rather than losing them to unnecessary costs.
Sara: And then there’s his story of the client who inadvertently practiced the Coffee Can approach. Remember? That client followed Kirby’s buy recommendations but ignored all the sell recommendations. Over time, this portfolio turned into an unusual collection of some very large holdings—some worth tens of thousands of dollars! Kirby’s takeaway? Strong companies can thrive and grow exponentially if you simply “set and forget.”
Shawn: It’s such a powerful example. Kirby highlights how traditional money management often focuses on short-term wins, equating activity with skill. But the Coffee Can Portfolio shows that consistent, thoughtful stock selection—and patience—can produce exceptional returns over the long run. It’s the kind of philosophy that, if more widely adopted, could reshape the very way portfolios are managed.
Sara: Kirby’s points go even deeper in More Than Numbers. His critique of performance measurement systems is so insightful. He calls performance metrics “good ideas that got out of control,” arguing that they misdirect attention toward quarterly results rather than sustainable value. Kirby advocates for assessing a manager over a much longer period—five or ten years—to get a real sense of their skill.
Shawn: Exactly, and he doesn’t mince words. Kirby argues that evaluating a manager’s performance over a mere two or three years is like flipping a coin—it’s too short to provide any meaningful insight. For him, true value creation requires a longer horizon and a qualitative judgment, focusing on a manager’s consistent application of an investment philosophy.
Sara: And he’s right. Kirby explains that short-term rankings foster competition that’s more about winning a “numbers game” than achieving long-term wealth for clients. This kind of environment encourages managers to constantly reshuffle portfolios, hoping for instant returns to climb in rankings. Meanwhile, the best managers are often the ones who hold steady, sticking with their philosophy despite short-term ups and downs.
Shawn: Yes! And then there’s Kirby’s critique of market timing, which he describes as the “Tooth Fairy” of the investment world. He views the whole notion as a myth—saying that no one can time the market with any real consistency. Instead, Kirby believes in the power of research and careful stock selection as the true paths to superior returns. He underscores that success comes not from predicting when the market will turn, but from choosing companies with enduring value.
Sara: His stance on market timing is a breath of fresh air. Especially today, when so many managers try to jump in and out of the market based on short-term indicators. For Kirby, the real aim of investing is to find companies with durable competitive advantages and then let time do its work. True wealth, according to Kirby, is built by focusing on value creation rather than chasing fluctuations in stock prices.
Shawn: And that’s what sets Kirby apart. He’s constantly contrasting real investing with speculative trading. He doesn’t see any place for “traders” in a long-term investment philosophy. He warns that the industry’s obsession with beating quarterly benchmarks is leading us further from true wealth-building.
Sara: And Kirby’s point about maintaining conviction through market cycles is critical. In More Than Numbers, he emphasizes that real investment talent isn’t about knowing when to jump in and out; it’s about having a clear, consistent philosophy and sticking to it. Kirby suggests that truly great managers have a high tolerance for periods when the market makes them look “out of step” with current trends.
Shawn: Absolutely. And it aligns so closely with what we believe at Balanstone. Kirby’s philosophy affirms our commitment to intrinsic value and our focus on patience as a virtue in investing. He reminds us that the true measure of success is in the creation of lasting wealth, not in outperforming on short-term charts.
Sara: His essays really validate what we do. Kirby’s writing is a powerful reminder that, while quick wins might feel gratifying, the only path to lasting wealth is through disciplined, research-driven investing. And by focusing on high-quality companies and resisting the temptation to “trade the news,” we can better harness the magic of compounding returns.
Shawn: It’s Kirby’s roadmap for navigating a noisy, often irrational market. He shows that by choosing sound businesses and letting compounding work over time, we sidestep the costly churn that plagues traditional money management. For those willing to adopt his long-term mindset, Kirby’s insights provide a blueprint for real wealth creation in a world too often fixated on immediate returns.
Key Takeaways from Kirby’s Philosophy
- High-Conviction Investing: Select a portfolio of quality companies based on deep, fundamental research and allow them to grow without frequent rebalancing or selling.
- Avoidance of Market Timing: Market timing is akin to chasing the Tooth Fairy—real returns come from thoughtful stock selection rather than attempting to time market cycles.
- Patience and Long-Term Horizons: Success in investing requires a mindset that embraces a decade-long or longer horizon, capturing the effects of compounding.
- Skepticism of Short-Term Metrics: Performance measurement should not be limited to short-term benchmarks but should evaluate managers based on consistency with a long-term philosophy.
By focusing on Kirby’s insights, today’s investors can reclaim the principles of true investing: discipline, patience, and a relentless focus on value.
References
Kirby, Robert G. “The Coffee Can Portfolio.” The Journal of Portfolio Management, vol. 10, no. 1, Fall 1984, pp. 76-79. Available at CS Investing.
Kirby, Robert G. “You Need More Than Numbers to Measure Performance.” Seminar of Chartered Financial Analysts and the Financial Analysts Research Foundation, 2 Apr. 1976.