Interactive thread on investment-related questions

[arshad5]

Re: Interactive thread on investment-related questions

@Southie

Sure. Management matters. Industry matters. As for macro economy and stage of business cycle, when economy is doing well most times that is reflected in prices. When business or economy is at peak of bus cycle prices reflect that. Most times the 3 statements reflect all these metrics.

When you buy good companies at attractive prices you don’t have to check prices daily or frequently - as you said. Buffett also has 2 rules as you know- don’t lose money. Don’t forget rule 1.

What you have suggested most certainly is an improvement over my approach. I am not very good at macroeconomy analysis. Market has flummoxed me when I have tried to incorporate it.

Maybe you can provide a test case of a stock or stocks that now meets your criteria.

You don’t want to buy at a time when the company is doing well unless you expect it do do even better or to continue its good performance for the next few years. You have to be cautious when the economy is doing well unless the company is going through a bad patch. Remember Buffets words on greed and fear.

My portfolio is quite diversfied, mainly consisting of real estate in mature and emerging markets. I stopped investing in stocks a few years ago…because I could not give it the time that it deserved. However recently I have made a purchase of a stock but in an emerging market. The company is a solid name in its field. The economy is growing and expected to gain momentum further in a few years. The inflation is around 8%. And I will be getting about 15% dividend yield. Basically the downside is negligible but the upside is great. Within about 2 years I can double my money. Even if the price does not increase the dividend itself is sufficient. There is another company that I have been keeping my eyes on. At the moment it is going through a bad patch but things will turn around soon. I was waiting for the shares to hit rock bottom before buying but they hit bottom and bounced back up by 20% within a few days. I am still waiting for the right moment to pay the second stock. Timing is very important. If I get it right I can double my money in 1 year.

I am out of touch with what is happening in the U.S and Europe. If I were to buy a share in the U.S then I would probably avoid tech stocks as they are very volatile. Then I expect at some stage to see a lot of cutbacks in the U.S expenditure as printing money will have to stop. In the light of this I would try to identify a sector that would come out unscathed. Then I would try to find stocks that would outperform the market in that sector.