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Investor's Checklist: Charting the Path to Success
Eugene Alexeev
August 14, 2023
Hello Investors!
Hope you're well. As we begin the week, we bring you a fresh dose of financial knowledge and news. I wanted to share exciting news with you - we continue to grow and are working on improving our letter. Expect enhanced design and content upgrades. Thank you for reading!
In todays letter
Learning: Checklist: Charting the Path to Success
News insights
Tourism Surge Boosts Turkey's Account Surplus
India's Housing Boom: A Flash or Future?
Biden Limits US Tech Play in China
Key takeaways from Microcap Investing video w/ Ian Cassel
Investor's Checklist: Charting the Path to Success
In the fascinating world of investing, the nuances are endless. Yet, some methodologies persistently rise above others, standing the test of time. Today, I want to dive deep into one such methodology - the investor's checklist.
The concept of an investor's checklist is rather straightforward. It's a predetermined list of criteria that an asset (typically a stock) must meet before it's deemed a worthy investment. Think of it as a chef's ingredient list. Without the right ingredients, the dish won’t taste the way it’s intended to.
Legendary investors like Warren Buffett and Charlie Munger swear by the power of a checklist. For instance, Buffett's adage, "Be fearful when others are greedy, and greedy only when others are fearful," can be distilled into one of the checklist items: "Is the market sentiment overly optimistic or pessimistic about the stock?"
Here's a snapshot of a value investor's checklist inspired by the teachings of these investing maestros:
Intrinsic Value: Does the stock price reflect its true worth? It should be trading at a discount to its intrinsic value.
Competitive Advantage: Does the company have a moat that protects it from its competitors?
Management Quality: Are the leaders competent, ethical, and shareholder-oriented?
Financial Health: Does the company have more assets than liabilities and a consistent earnings record?
Growth Potential: Is there a clear path for the company to grow in the foreseeable future?
Dividend History: Does the company consistently reward its shareholders with dividends?
Industry Stability: Is the company operating in an industry with predictable and steady demand?
Cyclicality: Is the business immune to wide fluctuations in economic cycles?
Return on Equity: Is the company generating a good return on shareholders' equity?
Market Sentiment: As mentioned earlier, is the market sentiment overly optimistic or pessimistic about the stock?
It's important to remember that while a checklist is invaluable, it's not infallible. As Charlie Munger once said, "It's remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent." A checklist aids in avoiding those blunders by providing clarity.
In conclusion, an investor's checklist is a powerful tool that serves as both a guide and a protector. By adhering to a well-crafted checklist, we minimize our chances of being swayed by market noise and emotions, thus allowing us to make decisions rooted in logic and reason.
News insights
Tourism Surge Boosts Turkey's Account Surplus
Turkey experienced its first current account surplus in 20 months, largely due to a 20% increase in foreign tourists in the first half of 2023. The balance of payments was reported to be $674mn in June, with tourism bringing in a net inflow of $4.2bn, partly because of the Turkish lira's decline, which made vacations cheaper for foreign visitors.
[📝Full article]
Key takeaway
This surge in tourism and the consequent current account surplus indicates a potential revival in Turkey's economy, especially after President Erdoğan's policy shifts following his election victory. For investors, it might be a hint of stabilizing conditions in the Turkish market, but they should remain cautious and closely monitor both Turkey's monetary policies and global tourism trends before making any investment decisions.
India's Housing Boom: A Flash or Future?
The Indian real estate market has witnessed a strong Q2 2023 performance with property prices rising by 7.21%, compared to 6.78% in Q1 2023 and 2.83% in Q2 2022. Major cities like Mumbai, Delhi NCR, and Bengaluru have observed property price hikes between 6 to 15%, propelled by a post-pandemic interest in home ownership, pass-through of increased input costs, and a premium on ready-to-move-in properties.
[📝Full article]
Key takeaway
The surge in India's property market prices signifies a strong consumer sentiment in the real estate sector. For investors, this buoyancy, combined with the forthcoming festive season, suggests potential opportunities in the property market; however, they should remain cautious given impending monetary tightening due to rising CPI and possible impacts from global economic uncertainties. Monitoring market dynamics and any shifts in demand and supply will be crucial before making investment decisions.
Biden Limits US Tech Play in China
U.S. President Joe Biden has signed an executive order restricting new U.S. investments in certain technological sectors in China, namely semiconductors, quantum information technologies, and select artificial intelligence systems. The order aims to prevent U.S. capital and knowledge from aiding China in developing technology that could bolster its military and jeopardize U.S. national security, specifically targeting private equity, venture capital, and other investment avenues.
[📝Full article]
Key takeaway
This development indicates heightened tension in the Sino-U.S. economic relationship, with implications for the global tech industry's supply chains and investments. Investors should closely monitor potential retaliatory actions by China and reassess exposure to affected sectors, ensuring they remain compliant with the new regulations while anticipating shifts in the geopolitical landscape that could influence future market opportunities.
Key takeaways from Microcap Investing video w/ Ian Cassel
Here are five key takeaways from the first segment of the video transcription:
The Importance of Networking in Investing:
Networking is crucial not only in investing and business but also in life.
As an investor matures, their edge goes beyond being analytical; it develops into a relational edge. The ability to quickly get to the truth about a stock is enhanced when you know who to ask or where to go.
Building a network helps in finding the truth quickly and can be a significant advantage in the investing world.
Microcap Club's Role:
Ian Cassel launched the Microcap Club in 2011 primarily as an idea generator to see what smart investors in the microcap niche liked and why.
The club also supercharged the ability to build out an investor network, allowing members to see what others liked and communicate with them on the platform.
Proactivity in Building Relationships:
To build a network, one has to be proactive. It's essential to showcase oneself, be it through starting a blog or presenting more.
When you find an idea you agree with, search for others who share that idea and connect with them. Over time, networking extends to connecting with management teams and industry experts.
The Role of Mentors in Investing:
Ian Cassel had two primary mentors who played significant roles in his development as an investor.
One mentor grew his portfolio from $100,000 to tens of millions by focusing on microcaps in just around 20 years, all while maintaining a full-time job.
The right mentor can provide guidance, share experiences, and offer insights that can shape an investor's journey.
Finding the Right Mentor:
When seeking a mentor, it's essential to look for someone who aligns with where you envision yourself in the near future (e.g., 10 years).
To attract a mentor, it's crucial to show value to them first. Demonstrating initiative, doing thorough research, and offering insights can pull potential mentors closer.
That’s all for today guys. Thank you for reading. See you next time!
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