In Looking for Value

Sometimes, the one thing that would help you find a great investment is if you fish where the fish are. All the good fishermen are good not because they are good at fishing, they are good fishermen because they know the location of the fishes. Its also the same as investing. If you know where to look, sometimes, whatever you do, you can not help but get good fish.

So where are the good places to look?

Before we look into that, we must first invert. What are the bad places to look for investments? Bad places on the top of my head are the stocks which are popular. Businesses that have bad business models or losing money. Businesses with corrupt managers. Stocks that went up irrationally.

Now that we left out those must avoid places. What then are the good places?

Good places are the old unpopular industries. Businesses that have good able management, good business models and making money. Businesses that are ignored by the crowd and has not been owned by most institutional investors. Meaning, there are less people looking at it and less people willing to hold it.

Stocks that have went down are also good spots to look at. When stocks are unwanted, a selling takes place. This selling of stocks might be a good fertile ground. Because the prices are now down, not because of a rational analysis but just a means of getting out, making profit or just plain irrationality.

Other good places, where there are events that would blur the valuation of companies.

Most importantly, we must be able to understand the place like the back of our hand. WIthout this knowledge, its just the same risky business of guessing and gambling. So pick your spots like the good fishermen. And hopefully, each investment decision would be easy. We like easy stuff.

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