Zurich-based investor and fund manager Guy Spier recently published The Education of a Value Investor. In this short, succinct book, Spier discusses how to become more successful as an investor; however, if you are expecting a technical approach to investing—with metrics and the like—you are looking in the wrong place. Spier’s focus is exploring what it truly means to be an investor.
Being an investor is, in many ways, like being the hero of one’s life story: full of ups and downs, difficulties, challenges and possibilities to prove oneself and one's character. Thus, Spier does not provide simple mechanistic prescriptions for investing; rather, he delves into the art of investing. For Spier, this art is best expressed through long-term value investing by searching for outstanding companies with transparent, robust business propositions. When stocks are undervalued relative to their intrinsic value, he holds them until they reach a fair valuation. In many ways, this philosophy is the Warren Buffet approach, and much of the book is about structuring one’s life and portfolio after the investment style of Warren Buffet. Here is some of his advice:
Stop checking stock prices all the time. This typically leads to buying/selling out of order. Only buy a stock if you are more than willing to keep it for two years.
Be wary if someone is trying to sell something. Watch out for hidden agendas!
Do not talk to management. They tend to be overly optimistic and smooth/persuasive (but do try to find out as much as possible about the management).
Do your research in the right order: first the fundamentals (growth, profits, cash positions), then the “gossip.”
Discuss investment ideas only with those you trust, and have a network of such people to pool your thoughts with.
Do not follow the emotional roller coaster of the stock market. Buy/sell when it makes sense.
Talk as little as possible about your investments, except to those trusted friends mentioned above.
The entire business ecosystem must be considered when investing. For instance, if the firm is introducing a new product, what will be the switching costs for the customers?
Watch how “distant” changes in the value chain might negatively affect a business. For instance, how does the financial health of the American consumer influence the German automotive industry?
Focus on stocks that are not only cheap and have good cash flow, but fit with your personal values. For instance, do you invest in companies that do not comply with certain environmental and governance standards?
Respect the perils of debt, and be patient; i.e., embrace conservatism in the best sense! Remember, stock-listed firms have leverage already. There is no need to leverage your stock portfolio.
As an investor (and as a person), one should follow one’s “inner scorecard” to judge how well one is doing. This is a very liberating insight.
Learn, learn, learn. Or, as Mr. Buffett’s right-hand man Charles Munger says, “If you keep learning all the time, you have a wonderful advantage.”
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