What not to do as an Investor !
I was in my Corporate Finance Class today when my instructor said something, I could relate a lot to. He said that we should not look up "7 Sectors You want to Invest in" or watch those shows in which suited individuals debate over which security has the maximum "upside" or which ones to sell as the target price has been lowered by a popular investment research firm. I felt he actually made a lot of sense.
Such shares are already bought by HNIs(High Net Individuals) and it is the task of these media outlets to popularise purchase of equities in the secondary markets. So I actually believe that there is no point browsing such websites or listening to such news and better to do our own research.
Don't you guys agree?
I agree so far to say never buy something strictly because XYZ said it on channel 123. However, knowledge is power and the more you know about a certain position or sector can't hurt, just take everything you hear with a (large) grain of salt. Everyone is pushing an agenda at all times, but I wouldn't turn yourself off from any medium of information.
I don't think it is the task of media outlets to popularize the purchase of equities in the secondary markets. The media outlets are there to to provide viewers with what seems to be quality information in an attempt to gain more viewers. The more entertaining or interesting they can make this information, the more viewers will be acquired. More viewers will get more ad revenue which is what the media companies are after. Equity markets have no need for the media to popularize them though...
Also, I don't believe HNI is a common acronym... stick with HNWI or UHNWI.
the media's job is to create entertaining content, rather than quality content, they are more likely than not investment professionals with a book to talk, rather than someone with a compelling track record. you have the occasional howard marks who comes on there, but I remember all of 2017 bloomberg had rugburns from sucking so much of the crypto fund managers dicks, and last year I don't know that I saw a single interview.
in my opinion, there's only 2 ways to invest if you're talking public equities:
investing ain't easy, but it also ain't complicated.
)Dear -
A long time ago (1984), I made my thesis about the efficiency of secondary capital markets. Conclusion was they were inefficient and I think that still counts. During the banking crisis, I bought bank shares and I still have these with a good but unrealized profit.
Another advice : look at what investors do who are influential and invest their own money. Such as … Warren Buffet. When they make a move, you can be sure there is a well balanced reasoning behind it.
a third advice : family-owned businesses or businesses that are controlled by experienced shareholders tend to earn better than businesses with a spread shareholdership. That is what I read several times and what I believe in.
Not disputing your points, but do you have evidence on your third point? Also, any recommendations on how to find good opportunities like this?
There are multiple papers on this topic. This is the first that came up when I looked it up on Google Scholar: "Family Firm Performance: Further Evidence" -Jim Lee
From the abstract:
"This article empirically investigates the competitiveness and stability of family-owned firms relative to firms owned by diverse shareholders. Founding families are present in about one-third of the S&P 500—the sample of this study. Data gathered over the 1992—2002 period confirm that family firms tend to experience higher employment and revenue growth over time and are more profitable. Regression analysis also supports that firm performance improves when founding family members are involved in management." Jim Lee
Dear -
I quote an article in the Belgian financial press (De Tijd) of 2015-02-28
"According to a study by McKinsey, quoted family businesses in Europe have achieved an average return of 7 percent since 1997, compared to 6 percent for MSCI Europe. That is a difference of 1 percentage point per year, but in a decade it makes a big difference. The University of Toronto calculated that the Canadian family businesses had an average growth of 7.7 percent per year over the past 15 years, compared to 6.1 percent for the multinationals. The worst scores are those with one large, but non-family reference shareholder such as a private equity group or another institutional investor. Those companies had an average return of 4.7 percent per year."
There are several ways to find companies that are family controlled. First of all the shareholders of the company can be investigated in for instance annual accounts or via the board of directors. Also databases like Bureau Van Dijk can shed light on the shareholders' structure. And editors like Forbes list fortuned people and give insight in where they invest in. Reading the press is also very helpful: I read the Belgian press daily and post a summary of all M&A transactions on Linkedin and that gives me insight in who is who. Last but not least building a network overtime helps to learn to know what shareholders you really believe in.
Hope this answers your question.
.
Watch changes in Director's interests under market announcements.
If they're buying, there's usually a reason. Same can be said for selling.
G luck
Yeah actually that could also be followed up by a robust analysis of the industry too so that I can see that they are actually trying to invest in some good projects and not just for the sake of investing.
I agree with your statement above - my suspicion with a lot of financial news media, if they are talking about an equity in particular, the play is mostly already made. Re: @BitchBook11's comment, which I think is right on the money, I also like watching the holdings of various funds on Fintel and seeing how they allocate, rebalance, and hedge.
While it isn't too timing-specific (13Fs are required only periodically), it can be useful here and there, e.g. Fund ABC closes out puts in XYZ co. before an anticipated earnings release and adds heavily to long position. Some of this is just noise, of course, but some can be useful if you find a high-performing analyst or fund to follow closely.
Pretty much agree. But if the popularization of certain stocks causes them to be overvalued, that can be a short opportunity. I do think there is generally some value in taking the pulse of what the everyday market participants think.
Avoiding big mistakes is crucial for those trying to invest a substantial portion of their net worth in individual stocks.
I really like Farnam street for pieces like the ones below. https://fs.blog/2019/01/how-not-to-be-stupid/? https://fs.blog/mental-models/
What the fuck is a HNI and why does this post not have more monkey shit to it? Call me a cynic but why would any moron invest based on a buzzfeed article?! I thought that was self evident
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