There have been a number of extraordinary posts over the weekend that you may have missed, as the weekend is usually quiet. I’ve compiled a few just posted since noon on Sunday. I’ve shortened them a little to fit. I’m sure I’ve missed plenty of posts, and if I missed yours, I apologize (there was a very interesting discussion of drones, for instance, but you’d have to read the whole thread, which was too much for me to include). Happy reading.
Although I spend a bit of time reading this board, and maybe someday will try harder to manage my own investments, I just invest in index funds right now; I do not manage my own investments. Similarly, I do not grow my own wheat, make or fix my own car, raise my own livestock, build or repair my own house, or make my own clothes.…Instead of spending time on this, I spend almost all of my time, and almost all of my fairly meager wealth, working with inner city children, trying to help them learn to read, do math, develop safe and healthy habits, and learn to deal with the huge pressures resulting from their circumstances – circumstances over which they never had the slightest bit of control. I do not think I am in any way better than you guys because I do this stuff and possibly you do not, but I also do not think you are somehow better than I because you manage your own investments and I do not. Things are not as simple, or as absolute, as some people here seem to think. Saul, it is Ok to be different; it would be a boring (and frankly unproductive) world if everyone did exactly what you do. We need people like you, but we also need farmers and dock workers and teachers – we need people who spend their time passionately doing other things than investing, even if it means they do not match your model for appropriate investing behavior. Long Tom
Nothing wrong with deciding that index funds are good enough … and smarter than thinking that you can pay no attention, pick individual stocks, and do as well … or, come to that, pick a mutual fund and predictably do as well. And, nothing wrong with lurking on this board because it is interesting and might provide education that will be useful later. The problem is people who think they are investors and yet clearly don’t know anything about investing because they do no due diligence of their own and expect certainty in a universe which is anything but certain. tamhas
If there’s a mistake to make, I’ve probably made it – multiple times! I’m slow that way. But despite all that, I’ve still beat the market handily since I started investing on my own a dozen or so years ago, so it honestly can’t be that hard. Hard would imply that one needs expert skill and excellent execution to achieve it, but I’m just learning like everyone else (and have no financial background) and my execution has been riddled with mistakes. It turns out you can make a lot of mistakes and still beat the market. Nobody should feel like it’s out of reach. Neil
What a great post! You are absolutely right. There are people with the interest and dedication that it takes to invest the way Saul does. There are also people with a personality type that’s not suited to managing investments. And I dare say there are also some people without the math skills do this. There is nothing wrong with this. But trusting someone else to manage your investments can be risky for two reasons. First, they must be honest and trustworthy or you might get swindled. Second, they must be competent or your investments might lose value when they needn’t lose value. One problem with the latter is if you don’t know enough to properly assess someone else’s skill then you are taking a big risk in choosing who will manage the hard earned money that may have taken decades of work to accumulate. To safeguard against this it would be best to learn as much as you can so you can at least determine whether or not someone is skilled or not. Chris
I too am deeply grateful for the many very intelligent posts on this board…I’ve learned a lot here and I continue to gain insights and knowledge . . . and a lot of it is not just informative with regard to investing, there just a lot of very interesting and thoughtful posts here. As for trading with no (or little) knowledge of the companies in which the money is being invested, it would not surprise me at all if this accounted for the vast majority of transactions. Technical traders do not find the business represented by a ticker to be of much interest. It is the chart of the stock (and sundry arcane statistics) that hold their attention. Then there are the programmed trades fired of by computer algorithms. No human thought goes into the selection of a particular company’s stock, it’s all based on mostly the same stuff that technical traders use. And of course, there’s the “flash boys” who also have no concern for business activity, only in the stock price. And of course there’s an army of individual “investors” who, as you noted, simply react to the latest newsletter recommendation, or Cramer’s buy/sell declarations; anything other than personal time, energy and thought given to analyzing a businesses operations and financial performance. Investors who follow the path represented by the majority of the folks who gather here are probably very much in the minority. I don’t remember when, but I remember at one time you posted that anyone can beat any index. At the time, I thought that to be a bold and suspect comment. You asserted that this is not really such a special skill and just about anyone was capable of doing it. Besting the index in and of itself should not be regarded as a great achievement. And it’s free for the taking, one only need read, understand and put into practice. And if there’s something that one does not understand, simply ask for an explanation - I, for one, have never been disappointed. Saul, you’ve created something quite extraordinary here. Brittlerock
One of the things I like about the discussions is that I think it gives some insight into how others are thinking about SWKS. Saul, you’ve proposed price anchoring as the reason the stock (is still apparently) cheap. And that may be part of it, but clearly a lot of people are just tossing SWKS into the “chip company” bucket and applying a whole host of assumptions. We saw that in action during the 10% dip a few months back, when SWKS dropped with all the other chip companies even though its outlook was so radically different at the time. More than anything, I think it’s that difference of opinion that is creating the current opportunity. I think you see further evidence of this view in the major analyst opinions. Back in early September, someone posted S&P’s rating on the Pro board:
We initiate analytical coverage on shares of this semiconductor provider with a Hold opinion…Our 12-month target of $61 is based on a P/E of 15.7X our FY 15 estimate, near peers. We see tailwinds including the adoption of 3G/4G technologies, led by China, and significantly greater revenue potential per device, in our view. We see the medical, automotive, military and industrial markets being positive contributors. We think SWKS will focus on opportunistic acquisitions to diversify.
So in other words, S&P saw a company with huge tailwinds and huge opportunity, but they gave (a Hold rating and) a 12-month price target of $61 based on a P/E of 15.7 “near peers.” And I think “near peers” is the magical phrase that explains so much of the market’s current outlook on the company. We may be wrong about the business, of course, and the folks treating SWKS just like every other chip company may be right. But I would like to think that those of us who have taken the time to really get to understand this company’s differentiators have a long-term advantage over the folks applying blanket industry assumptions to the company. We’ll just have to see Neil
I suspect that many large institutions buy stocks based on sector selection. IOW if they think railroads are going to do well because freight traffic is increasing, they will buy a basket of railroad stocks, Because when a sector is hot, almost all the stocks in the go up. In order of importance it is first general market, then sector, then individual stock. Mauser