Tuesday, May 10, 2011

Lone Wolf Investing

I don't have a staff that interviews 50 investors, customers & employees to investigate a prospective buying opportunity. I don't buy expensive business reports on sectors or industries. I don't hire investigators to check out industrial plants in foreign lands. There's nothing wrong with those things. I wish I could do that. All those things mentioned, help but bring their own problems and biases into the picture. Even with the best resources you can get into "value traps". Some day-traders, chartists, and momentum traders don't even seem to react to investment reports, but lean on hard-learned rules and instincts.

I have been thinking about what I am trying to accomplish with this blog all weekend long. I want to defer to an expert.  Hat tip to inoculatedinvestor.blogspot.com  where I found conference notes on the May 2011, Value Investing Congress in Pasadena. In the agenda notes, there is a speech that seems to dove-tailed with my thoughts called  "The Human side of Investing, or the Difference Between Theory and Practice" by Howard Marks, from Oaktree Capital Management.  In the future I would like to find a transcript of the lecture and continue this as a separate post.

I don't have an MBA in finance. I'm not qualified as an investment advisor. I don't have a hidden agenda. I do this blog to study and crystallize my thoughts. I generate watchlists through filtering relative value and growth metrics, and reading  S.E.C. documentation filings. Then I try to read all the news pertinent to this stock and its sector. Only 5% of the people trading really know what they are doing.  [and I'm not one of them.] The trading community is a small world and knowledge is paramount. What news has been assimilated? What is common knowledge and is widely talked about throughout the rest of society? What subtle facts are being ignored? I imagine other trader's investing styles and judge how they would trade. What if things were different or only temporary?

Finally,  I close everything down and turn everything off. I think of which facts that seem the most plausible and least well known. Else, I try to come up with an independent  idea or judgment that I have not read about in the press. Nothing is totally original. Someone else has thought this through, too. Maybe they're betting on it, too. A variation of the facts....

Is this investing idea sound? Is it fact-based or a judgment?
Is this idea actionable in the next 3 weeks?

Contrarian or Lone wolf investing.... Then it's just up to position sizing and making sure things don't change unexpectedly or go the wrong way. If I get good enough at this maybe "the wolf can eat what he kills".

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