Friday, November 24, 2006

My Investment style

I believe investing is a psychological game with monetary outcomes (you make profits or losses). To make money in the market (most of the time) all you have to do is take a position and wait for the price to rise. For instance, in the past 2 months you could have bought Barclays at sh250 and Jubilee Holdings at Sh180 and gotten out at Sh.600 (Barclays) and sh300 (Jubilee Holdings) now.

That’s the easy part, to get into a position you need guts/balls/confidence and to get out at a good price you need to tame fear and greed.i.e. You fear you are getting out at a lower price i.e. the price of the share may appreciate after you sell.

How do i buy a shares?
I consider the following four factors sometimes together sometimes in isolation. For instance, i recently added
Jubilee Holdings to my portfolio. I only considered the Market sentiment and the numbers when purchasing it.

The four factors are:
1. Big picture
Meaning how the Economy and the sector will grow in 5-10 years and where that company will be then. I like it if the firm's sector is growing and the firm can corner a large section of the sector.

2. Management track record
If the management/owners have a record of delivering, it definitely makes the firm appealing.

3. Market sentiment
If the market undervalues a share or ignores good prospects in a company. That's the time to get in. Because markets tend to rise over time BUT not in a straight line. Like
Kenol Kobil when it was at Sh.65

I remember when KPLC was sh.330 a share in the late nineties, then Sh.6 in 2002 and today it’s at sh.288 today.
At all those prices there were experts who could 'justify' that price with charts, Valuation models and research.

Investors who bought at sh.330 still don't have their money back (KPLC didn’t pay dividend in some years). Those who bought at sh.6 are marveling at their 'intelligence'.

Right now the market favours stocks that have low absolute price i.e. below Sh100 and low issued shares -less than 100,000,000 issued shares e.g.. Jubilee Holdings. My current style is geared towards this.

When the market changes so will I. You can never bet against the market.

Is the Balance sheet healthy? Does the Cash flow appear healthy? Is the firm's debt sustainable? I also look at metrics like
EPS, P/E ratios.

Influential Investors
These are the people who influence my thoughts on investing

-Carl Icahn- I love his tactics

-Warren Buffet-Everybody loves his style. But he is an extremist when it comes to saving his money (borderline miser). What’s the use of being a Billionaire if you can’t have a Gulfstream?

-George Soros -Famous speculator. Only guy to have ever fought against a Central Bank and won big i.e. US$2 Billion. He’s never afraid to lose.

-Richard Rainwater- Got into Cell phones in 1979 and Oil in 1998 when they were considered ‘dead’ sectors. CLICK HERE for a BUSINESSWEEK article that disparaged him but he got the last laugh.

Dr.Gakombe - Few know that he once was a shrewd investor on the NSE.I'll tell the story someday.


coldtusker said...

Most of the guys on your list ae Mavericks - they do NOT listen or care about others & can be long-term investors.

CI - Legendary but slowing down now.

WB - My fave. He does not spend without reason. He has a jet thru NetJets. He is contented & doanted his money. He has MORE respect than the spendthrift thieves (sese seko, qaddafi, bongo) of Africa.

GS - Encouraged democracy in the former Eastern European countries.

RR - Believe in yourself AFTER you have done your homework!

Gakombe - Known him since his KPLC days! Do highlight his story & Metropolitan Health...

pesa tu said...

I like them precisely because they "do NOT listen or care about others"
Thats what it takes to be successful in this game.

I was referring to WB's legendary Stinginess.

Gakombe-we r on the same page.We should do a joint effort on this

coldtusker said...

WB - Makes money ethically. Spends a fraction. Donates the rest to do good.

dan moi - steals money & land then fokks poor starving wananchi by having them buy him a fokker plane!

I look up to WB.