Andrew Page - Spiffy Pops
and Ten Baggers
This episode is an edited highlights of a Facebook Live starring Andrew Page, the founder and managing director of Strawman.com an online investors club which shares independent share market research and recommendations between Australia’s best private investors. With 11,000 current active members it is a thriving community of investors who compete against one another based on performance and community endorsement. Andrew has worked in financial markets for over 20 years, with experience as an equity investor and as a market commentator.
Financial Habits for life
If you spend less then you earn, invest consistently in a broad-based ETF, and start early the effects of compounding will set you up for success. Warren Buffet made the majority of his money after the age of 55 and one of the keys to this was the amount of time he was in the market and the habits he built through life.
Buying Individual Shares; A Broad Checklist
Andrew and the community at Strawman.com are active investors, that is they do fundamental research and analysis in order to identify companies which may be undervalued or have huge long-term growth potential. Their aim is to outperform the market and in order to do this Andrew has developed a check list in order to find investments which have this potential. The opportunity cost of investing in one stock, is not having that money to invest in another, and so having a criterion to find the best investments is an essential tool for an active investor.
- Do you understand the business? It’s okay if you don’t know. One person can't know everything. If that's the case this probably isn’t the investment for you. Having a fundamental understanding of who a business serves and how it serves its customers is crucial.
- How do you gain an understanding of the business? Mostly this will come through reading of company reports which are available for free online. The importance of having this intellectual curiosity cannot be overstated, by doing this work you will continually compound your knowledge across industries and sectors and will refine you understanding across multiple iterations.
- What are the risks? Focus on the downsides, we all suffer from confirmation bias and you need to try to overcome that. If you can’t argue the bear better than the bears you have not objectively assessed this stock. You need to know what failure looks like and be able to measure it objectively.
- Is the balance sheet in good shape? Leverage can be your friend, but it is also one of the things that can get a business into trouble faster than anything else. Can changes in the cash flow accommodate this leverage? Often times of crisis present the greatest opportunities, companies with robust fundamentals and strong balance sheet can take advantage of the opportunities which crisis presents.
- Can you trust management? Are the managers views and financial incentives aligned with the company? Just because a manager sells doesn’t mean the fundamentals of the business are gone. Insiders sell for many reasons, but only buy for one.
When do you sell a winner?
Would you buy a stock at its current price is always a good fundamental question to ask yourself? If the answer is no then it may be time to sell, just because you have made money on a stock doesn’t mean you should keep it, any fall in price is you not materialising the gains which you have made, whether it’s in your hand or your portfolio you have lost the same amount of money.
This post was incredibly well-researched and written by Hayden Toohey. Hayden's a student at UTS and an intern at the Australian Shareholders' Association. I predict that he will be running the Reserve Bank within a couple of years. Here's a link to his LinkedIn profile if you'd like to get him before the Reserve Bank does.
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Shares for Beginners is for information and educational purposes only. It isn’t financial advice, and you shouldn’t buy or sell any investments based on what you’ve heard here. Any opinion or commentary is the view of the speaker only not Shares for Beginners. This podcast doesn’t replace professional advice regarding your personal financial needs, circumstances or current situation.