November 10, 2022
Basic investment philosophy
Investors are, generally, irrational. By being rational, we can take advantage of underpriced assets to generate safe and consistently high returns in the medium to long term.
Analysts have ranges for a company’s value and therefore share price. While these can vary, generally the range is relatively tight. It’s based on multiple types of analysis, taking many data points into account, including fundamental, technical, and sentimental analyses. But what’s interesting is that there is generally consensus as to the range a share price should be within.
External forces can cause a company’s share price to drop or rise beyond this range. These external factors can be “real” or “temporary”. Real factors being something like a patent expiring; temporary being a lawsuit or supply chain issue, or even a disappointing earnings report.
Additionally, there are macro economic and “headline”-type risks, such as the extra-marital affair of a CEO and similar. We love these, as they temporarily throw up fantastic opportunities for growth.
As opposed to pure value investing, our philosophy is based on “Value Plus”. We look for shares whose value is generally agreed upon by a wide range of analysts, but where this value is temporarily depressed. This results in very low risk, and an enjoyable upside. Once the value of the share is trading above the “consensus band,” it can be traded in favor of the next investment.
The opportunity
By taking a prudent yet positive approach, significant returns can be generated.
The challenge
The main challenge when it comes to medium and long term investment horizons is not to get caught up in the hysteria and group-think that grips the market – in fact, it’s to do just the opposite. It’s to embrace dips and periods of opportunity, and lock in gains during periods of prosperity.
Stock picks for November 2022
Purchases for November 2022:
Amazon: $86.14
Alphabet: $87.32
STAG Industrial: $31.02