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Here's Some Investing Advice To My Younger Self

Jun. 30, 2015 10:54 PM ETAEO, DIS, KO, PEP34 Comments
William Bias profile picture
William Bias


  • Stay away from perfectly competitive businesses.
  • Obsolescence has a further reach than you think.
  • Think like a business owner.

I love stock market investing. It provides an individual the best possible chance of wealth expansion. I have been a student of the stock market for 23 years, since my sophomore year of high school. My boss, who was also my uncle, first turned me on to stock market investing when I worked my first job as a bagger at Winn-Dixie Stores, Inc.

I remember reading every book I could about the stock market, including Common Stocks and Uncommon Profits by Philip Fisher and The Intelligent Investor by Ben Graham. Eventually, about 10 years ago, I developed a 6 Point Inspection criteria list that I use in evaluating publicly traded businesses, as seen in some of my writings here on Seeking Alpha. However, experience taught me a few important and costly lessons down through the years that I wish I knew when starting out. Here's some advice to my younger self, and to other high school stock market enthusiasts and investors at large who are just getting started.

Stay away from perfectly competitive businesses

Essentially, companies that operate in a perfectly competitive environment face a huge number of competitors with similar products. Also, the barriers to entry reside in the low range. As a prime example, I purchased shares in my first employer Winn-Dixie Stores, Inc. with the reasoning that everyone needs to eat. I also noted the huge number of competitors that the company faced. I bought into the rhetoric that competition can keep a company on its toes.

However, I didn't fully grasp the full downside risk of operating in a highly competitive environment. I discovered what generally happens is that all players drag each other down, unless one of them differentiates in a serious way or buys up the competitors.

I hit it lucky with Winn-Dixie. Observing the

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: I am/we are long DIS, KO, PEP, WMT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (34)

Hardog profile picture

Very interesting description of your investing journey. Also nice to see the realism, ya lost $ initially and you progressed after you learned. I have been there myself in the same progression.
William Bias profile picture
Thanks Hardog.
FinancialDave profile picture
Good article and title.

To my younger self I would have cautioned against trading in individual stocks and put a larger portion into an index strategy.

William Bias profile picture
Thanks for your readership FinancialDave.

Excellent advice i wish i had heeded when i was younger and investing very actively
and heavily. Thanx!
William Bias profile picture
Appreciate your readership Abdul Malik.

Dividend Latitude profile picture

Most folks have to make some investing mistakes to learn how to be good investors. I know I have had my share.

Anyway, I enjoyed your article. I have never owned stock in any grocery chain.

Another good example that supports your thesis is the airline industry (no thank you, I will not buy Braniff or Pan Am etc.). Also, I watched a lot of TV growing up and saw so many going-out-of-business sales ads for furniture stores that you couldn't pay me to invest in a furniture store.
William Bias profile picture
Thanks for reading grisly_atoms.

User 35426 profile picture
Good advice regarding companies/industries. "Story" stocks can work out at times, but most often in my experience I've lost money on purchases made as a result of a "tip" or glowing article and made money after doing my own research and confirming it with research from other, more experienced investors.

I would also recommend for enthusiastic younger stock market investors that they have a bucket of "play" money for their more speculative investments and use more of a buy & hold, long-term approach (with periodic rebalancing) for their retirement assets. At least until you've gotten much more experience under your belt. That way you don't place your retirement savings at risk to your own investing mistakes (we all make them, and still do).
William Bias profile picture
Hi User 35426,

I see a hint of Ben Graham in your comment. Prudence should trump greed in investing, especially retirement.

Thanks for reading,

joanpete profile picture
William, aaaaaaand we always prefer to invest in companies' stocks which are doing at least fairly well in the "stocking"-market. When I began investing -- I was college-age -- an older friend told me about "buy-low-and-sell-high. ((How about buying-high-and-never-... selling so long as the underlying facts hold up!!)) Guess what! To buy low MAY mean that the investor is buying into a VALUE TRAP. No thanks! Changing the subject: Whether I am doing "better" than the market is OF ZERO CONCERN TO ME. When I go to buy groceries, the clerk does NOT ask me if I outperformed the market, nor does the clerk at Nordstom's when I go to buy a new dress!
William Bias profile picture
Buy and hold represents your best bet in winning the stock market in my opinion.
joanpete profile picture
Always remember that DIS is A // if not THE // KING OF CONTENT. Plus owning all kinds of other businesses.
William Bias profile picture
Hi joanpete,

Walt Disney's content represents its greatest barrier to competition in my opinion. No other company can produce a Mickey Mouse, Donald Duck or an Avengers.


siestadreamer profile picture
I would add a few more guidelines to your list, William.

Favor companies with visionary leaders, not short term managers. Examples include Howard Schultz, Rich Kinder, and the late Steve Jobs.

Beware companies in industries where demand is affected by market forces beyond their control, commodities in particular. Miners and drillers come to mind here.

Tread carefully where the government is your business "partner." Tobacco, banking, and regulated utilities require particular attention.

Boring can be beautiful. Companies that fly under the radar of CNBC can offer solid, long term potential with less volatility than some of the market darlings.

Thanks for your article.
RockinU profile picture
siesta, I agree with most of your assertions, but while I agree that caution is needed when the government is your business partner, you mention tobacco, but tobacco has been a stellar performer, even with so many predicting it's impending collapse for 2 decades. Other government partners include defense, which have also performed well.
William Bias profile picture
Hi siestadreamer,

I appreciate the advice. Philip Fisher said that there are two types of companies: "Those that are fortunate and able" and "Those that are fortunate because they are able". This article was meant to examine things to avoid. I didn't really emphasize other things to look for, which I should have done more here.

Thanks for readership,

William Bias profile picture
Hi RockinU,

Personally, I prefer companies that sell products with the repeatability of purchase. Companies that cater to governments or other businesses can lose profitability if those huge clients get all the product they need or if budgets become constrained due to political or economic constraints.

Thanks for reading,

Like the others, I find DIS overpriced right now around 114. Bought it on a dip not that long ago at 85 and ofcourse wish now I bought more.

I think you're wrong about KO. Take out the currency conversion (temporary headwind) and what do you have? KO is not done minting millionaires yet.
Mark Morelli profile picture
I agree. Pundits have been predicting the demise of various products and companies for decades like AAPL (the iPhone was dead in 2012 according to those in the know), KO, and MO. Some predictions work out and some don't. No one really knows what will happen. It's best not to predict or assume (you know what they say about people that assume?).
J Mintzmyer profile picture
I don't think KO is dead, but I agree with the authors general premise that their business model is challenged. KO is the new PM, but it's trading at a crazy multiple.

I'd love to own KO or PEP at the right price. Both need a 20-30% haircut at a minimum.
William Bias profile picture
Hi sbally4,

Coca-Cola can also pull the price lever. However, it needs to turn around it volume as well.

Thanks for reading.

J Mintzmyer profile picture
Great article discussion, but the DIS boat has sailed and is now one of the most overvalued blue chips on the market.

This would have been a fantastic write up on DIS two years ago right after they bought Lucasfilm.

I'll readily admit I sold too soon on DIS, but I wouldn't want to get stuck with shares at current levels, priced for growth perfection on top of a company that is currently firing on all cylinders and at the top of its relative entertainment property cycle. ESPN is facing threats from all angles with the current TV revolution and that's their major cash cow. Theme parks and cruises are clearly cyclical.

I'm not saying DIS is a bad company, it's clearly a fantastic one, but price is key here- the price is scary on any conceivable metric.
Dividend Math Guy profile picture
I agree with J Mintzmyer here. Aside from DIS, how would you apply the advice in this article today?
joanpete profile picture
Hi, J! I am fond of saying "Good things have a way of costing money." ((Disclosure: You may have seen me recite this fact inside of a previously-submitted Comment.)) Don't faint! I added to my DIS holdings only a few days ago -- when they announced their dividend policy change. Was I scared? You better believe it. I am scared whenever I invest. Am I disappointed in myself that I did not begin buying DIS many years earlier? You better believe it! With a scoop of ice-cream on top!
William Bias profile picture
Hi J,

I don't think the ship has sailed. I bought my first shares in the company about eight years at a high valuation. My value got halved in 2009 but is now my top holding. As far as the tv revolution...I believe Disney's content is king no matter the means of distribution. See article here: http://seekingalpha.co.... Morningstar has Walt Disney's P/E ratio pegged at 25 vs. 19 for the S&P 500 as a whole meaning it is overvalued. If it corrects pick up some shares. However, earnings could blow it out of the water shrinking the P/E if the price holds steady or the price could increase to adjust back to the current P/E. Unless Star Wars bombs I don't expect Walt Disney's earning to shrink this year.

Thanks for reading,

Great article. I am a teenage stock investor, who has had fairly good luck since starting in November, up about 20% more or less. I love investing, because I can follow the companies so closely, and make money. Thanks for writing
William Bias profile picture
Thanks Cman*5. Learn all you can about investing. Remember..owning a share of stock means you own part of a business. It comes with risks as well as rewards. The earlier you start the better off you will be.

Appreciate your readership.

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