Investing Research

[robertbanking]

Hello you wonderful and intelligent individuals that make up this forum, i sincerely hope you are having a good start to the week.

I have done a course online in relation to Value Investing, which i found very helpful. It took me through the process of evaluating stocks briefly, finding ones with high operating margins, low debt. Then doing calculations on strong stocks such as Enterprise Value to determine if the stock was undervalued. Then fully evaluating all public statements like Annual Reports and any red flags to look for. It was like a masterclass, with everything you need to become successful Value Investing. Since then i have read books such as Peter Lynch One Up One Wall Street and it seems to mention mostly everything i know, but a different slant on things such as looking for stocks that Wall Street might have missed such as Knife and Fork Manufacturers, Funeral service stocks etc.

I kindly wondered whether this further reading of investing books is now necessary as it seems to confuse things further. There is certain tips within the book however i found the Value Investing course the most helpful. Can i kindly please ask whether i should now continue practising my skills researching stocks and whether the further reading of books such as Peter Lynch would be necessary for my growth please? If anyone kindly had any thoughts on this i would be forever grateful and thankful for your support with this, it would mean the world to me.

Sending you lots of good wishes and i truly hope you become massively successful with your investing and have a wonderful life. Very best wishes.

[minnow]

Doing research on individual stocks is, in my humble opinion, completely pointless. Do it if you enjoy poring over spreadsheets, but don't do it in the hope that it will make you rich. Even Ben Graham, the "father of value investing", had largely given up on security analysis by the end of his life. In 1975, he wrote :

I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when our textbook "Graham and Dodd" was first published; but the situation has changed a great deal since then. In the old days any well-trained security analyst could do a good professional job of selecting undervalued issues through detailed studies; but in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost.

That was over fifty years, before the advent of personal computers (let alone the internet as we know it, and the availability of mountains of completely free financial data). Nowadays, you've got quant funds scouring the globe for the tiniest mispricing, and even schoolkids can write their own machine learning trading algos after watching a couple of YT videos.

Investing is about bearing risk. You're essentially buying future cashflows at a discount to their fair value because other people can't deal with the uncertainty and emotional stress of owning risky assets. There's no magic formula. If it were possible to predict which stocks were going to do well, the uncertainty would vanish and there'd be no risk premium. The path to success is to buy a broad basket of stocks, and then forget about them.