With equity markets correcting to the downside investors should already be researching companies for prospective purchases. Buffett, a man with great balance of head, emotion and pocket, said that when markets fall he’s reading more 10K’s.
Unfortunately not all of us are professional investors and research time may be limited. Therefore investors must utilise their time very efficiently. Like Buffett I go through the Indices but I have a few tips in order to be ready when markets fall.
First of all find a jumbled list of constituents for an index. Research gets pretty boring if you have 250 companies that start with ‘A’ and you research every company in a straight line format. Variety is a spice of life.
Also try to upload the file to an Excel spreadsheet. As you research, highlight each company either red, orange or green. Is the company outside your circle of competence ? Highlight it red. Does the company look interesting but needs more research ? Highlight it Orange. Does the company tick all the boxes ? Highlight it green.
A major advantage of an Excel spreadsheet is that you can also write notes on the company. For example I list notes on price targets, law suits, reorganisation, spin offs, net working capital etc.
In times of market downturns I find such a list is an easy reference point. Furthermore when the market is trading at fair value or above you can take your time researching the highlighted companies so that you are very familiar with them when the market uptrend breaks.
Another ‘tool’ that I use is to read about gifted investors and the massive returns that they have made. I will share some of those statistics now regarding some of Warren Buffett’s investments.
Most of the above purchases were initiated during the bear market of the early seventies. They are classic Buffett as they contain a strong competitive advantage. Buffett always said that he’d like to own the only newspaper in a town.
Hopefully the gains that Buffett made will inspire the reader to dig as much as possible in preparation for, hopefully, a larger fall in the markets.
Value investing is my hobby as well as my vocation. I am a director at www.shareladder.com and have written a value based newsletter for the site since May, 2010. The portfolio based on my newsletter is up just under 40% during that time.
Unfortunately not all of us are professional investors and research time may be limited. Therefore investors must utilise their time very efficiently. Like Buffett I go through the Indices but I have a few tips in order to be ready when markets fall.
First of all find a jumbled list of constituents for an index. Research gets pretty boring if you have 250 companies that start with ‘A’ and you research every company in a straight line format. Variety is a spice of life.
Also try to upload the file to an Excel spreadsheet. As you research, highlight each company either red, orange or green. Is the company outside your circle of competence ? Highlight it red. Does the company look interesting but needs more research ? Highlight it Orange. Does the company tick all the boxes ? Highlight it green.
A major advantage of an Excel spreadsheet is that you can also write notes on the company. For example I list notes on price targets, law suits, reorganisation, spin offs, net working capital etc.
In times of market downturns I find such a list is an easy reference point. Furthermore when the market is trading at fair value or above you can take your time researching the highlighted companies so that you are very familiar with them when the market uptrend breaks.
Another ‘tool’ that I use is to read about gifted investors and the massive returns that they have made. I will share some of those statistics now regarding some of Warren Buffett’s investments.
Company | Cost | Value |
The Washington Post | $10.63m | $1.37bn |
Ogilvy & Mather Int. | $2.76m | $12.83m |
Interpublic Group | $4.53m | $34.31m |
Affiliated Publications | $3.52m | $55.71m |
Kaiser Industries | $778,000 | $6.04m |
Media General | $4.55m | $12.29m |
Most of the above purchases were initiated during the bear market of the early seventies. They are classic Buffett as they contain a strong competitive advantage. Buffett always said that he’d like to own the only newspaper in a town.
Hopefully the gains that Buffett made will inspire the reader to dig as much as possible in preparation for, hopefully, a larger fall in the markets.
Value investing is my hobby as well as my vocation. I am a director at www.shareladder.com and have written a value based newsletter for the site since May, 2010. The portfolio based on my newsletter is up just under 40% during that time.
