By Barry Schwartz
Over the past fifteen years I’ve learned a few things about investing and managing money. No two investors are alike. But here’s what works for me.
1) I am not a better investor because of my university and investment degrees. All that I have learned about investing and managing money has come from my time in the market, reading about investing and listening to my partner, David Baskin.
2) If I’ve done my homework and properly valued a company, the only person I should listen to is me.
3) The internet is a great resource to find investment ideas. In an instant, I can look at the holdings of great investors, read terrific analysis from various blogs and get all the data I want. It can be overwhelming so you have to focus your time.
4) I have never regretted buying a stock with a low valuation, reasonable balance sheet that either raises its dividend or buys back a lot of stock.
5) Companies that grow their dividends even with low yields will outperform those with high yields but offer no dividend growth.
6) I am happy to listen to other’s opinions, but I will never make an investment decision based on what someone has told me until I’ve done the valuation work myself.
7) Nobody, and I can’t stress this enough, nobody can time the market or can predict what will happen with the economy, interest rates or currencies with any accuracy over the long run.
8) Buy and hold works for us and our clients. Our best investments are ones that we have held but constantly monitored over the long run. Companies like Cineplex, Saputo Cheese, Bank of Nova Scotia, TransCanada Pipelines, Keyera, and Home Capital to name just a few, have been holdings for us for over 10 years and have created a lot of value for our clients.
9) Free cash flow yield is our best friend. Good things happen to companies that generate a lot of free cash flow.
10) When the market goes down there is no shortage of people telling you that it will get worse or that they knew the market was overvalued. Those same people never tell you when to buy or when the market is undervalued.
11) Commodities are our worst enemies. No company has the ability to control its destiny, but companies that have pricing power at least have a fighting chance. Commodity producers are price takers and in our experience they take their fair share of punishment.
12) Whenever someone tells me to sell something because it hasn’t done anything lately, I get super excited. I don’t care what a stock has done, I’m only interested in its future potential.
13) Whenever someone says a business/industry is in structural decline, I also get super excited. We’ve made a lot of money buying companies that supposedly were selling a product or service that people aren’t going to use anymore. Things don’t change that fast.
14) Charlie Munger has served me well by revealing the 3C’s of investing. Cannibals, Compounders and Cloning. Cannibals are companies that buy back a lot of stock. Compounders are companies that generate high Return on Equity and Return on Invested Capital. Cloning is looking at what great investors, such as Charlie Munger’s partner, Warren Buffett, are buying/selling and figuring out why.
15) Every single dip in the market has been a buying opportunity since the beginning of time. You can be miserable during a bear market/correction but don’t panic.
Every day the market is open is a chance to learn something new. Keep on learning.
Clients of Baskin Wealth Management own shares in the stocks mentioned in this post.