I am a 27 year old investor. I have experience purchasing distressed real estate, particularly finished residential lots in Northern California. I'm on here to learn from other investor's ideas and to have a forum to write down my investment ideas and receive feedback. I don't hold on to any of my ideas so fondly that I can't be influenced by another's insight, or presenting additional research I'm not aware of.
As an investor, I look for companies with excellent long term economics and capable, honest management that can reinvest earnings at an attractive rate.
My view is that it is best for to find companies that can compound earnings internally at a market beating rate rather than relying purely on the arbitrage profit gained from buying assets at a discount from their intrinsic value. I hold this view for two reasons:
1. The market has become more efficient as more value investors rise having gained exposure to Benjamin Graham's teachings either directly or indirectly though knowledge transmission in the industry. Therefore there are fewer severely mispriced securities.
2. The approach of finding excellent companies allows the investor to park his money within the stock for longer, as the company will increase by value autonomously through the virtue of the company increasing its business value year over year. This prolonged holding period has a multitude of benefits such as: (A) reduced transaction costs as fewer trades are needed for the portfolio, (B) An interest free loan from the government, as capital gains tax will only be paid when the security is sold and gains are realized (For a more detailed discussion see section "Taxes" in http://www.berkshirehathaway.com/letters/1989.html), (C) the ability to follow fewer securities and expend more resources researching and understanding each better, as fewer investment decisions will be needed to be made over any time period. This leads to investing in the investor's best ideas.
As I believe the goal of compounding capital at an attractive rate primarily falls on the management of companies held in the portfolio, my view of my job as an investor is focused on these roles:
I. Identification and Diligence: The first and foremost job of the investor is identifying attractive companies with excellent long term economics and capable management, and then doing the full diligence to understand the economics of the company and address any potential red flags that comes up during the investor's research.
II. Price monitoring: Even a great company is not a good investment at certain prices. Therefore the investor must monitor the price to buy at a fair or preferably a discounted price. Also, if a security begins to have a market value far beyond the business value of the company, the investor should sell his holdings to return capital to reinvest in more reasonably priced excellent companies.
III. Business monitoring: Not only does the market price of the business need to be monitored, so does the business value of the investment. If the economics or situation changes at the company, the investor must know and continuously reevaluate the investment thesis.
IV. Portfolio Diversification: the investor as a capital allocator has the job of eliminating individual industry risk of the portfolio. Each portfolio company's management can focus on providing excess returns within their industry. The investor must also look at it from a higher level and diversify away from industry risks by holding a portfolio of non-correlated securities operating in different segments of the market.
Adam Xiao graduated with a degree in Operations Research and Management Science from UC Berkeley. He currently works as an Equity Research Associate at a major Investment Fund.
I am a Financial Analyst and maintain my own Site http://www.everythingaboutinvestment.com where i put the articles regarding investment so that it can help each and everyone around the globe to get an detail insight into Investing and Investment.
Hewitt Heiserman Jr. conceived the Earnings Power Chart, which is the subject of his book "It's Earnings That Count" (McGraw-Hill, 2004). Mr. Heiserman is a member of the Boston Security Analyst Society and the CFA Institute. He has been quoted in TheStreet.com, The Wall Street Journal, BusinessWeek, CBS MarketWatch, Business 2.0, Better Investing, The Motley Fool, Complete Growth Investor, Barron's, and the Haverford Trust Company Adviser. Mr. Heiserman has spoken to the New York Society of Security Analysis, the Boston Security Analysts Society, Babson Investment Management Association, the American Association of Individual Investors, Fidelity Management & Research, Complete Growth Investor, Bryant College and Franklin-Templeton Group on "Ben Graham and the Growth Investor." Mr. Heiserman graduated from Kenyon College with Distinction in History, and received the Faculty Award for Distinguished Achievement. An Ironman triathlon finisher, Mr. Heiserman is also active in open land preservation. In 2019, Columbia University will publish Mr. Heiserman's second book, "The Superinvestor's Checklist."
2009: Miami, FL Aspiring value investor. Focus on quality of balance sheet, the new "net nets" (FCF), and the tenets of Benjamin Graham, Philip Fisher, Warren Buffet, and Charlie Munger. Every investment should be a value investment. You're buying things at, by your estimate, less then they're worth. It's a no-brainer as long as your research is thorough and your assumptions sound.
2016: Value investing skills are great. Value investing in practice (in public markets) is tough. Gotta find the places where others are not looking. And not look at stock prices every day. Maybe once a month.