Profitable investing
involves a lot of hard work. It includes numerous tasks
including an extensive gathering of wide-ranging corporate
and economic information, a serious analysis of accumulated
data and finally a number of investment judgments.
Eventually this leads to a definitive conclusion whether a
particular stock should be bought or sold.
In fact, once a stock is
purchased, the laborious legwork has only begun. As analysts
we must track the company literally through a microscope. We
continue to monitor and analyze corporate data in the form
of earnings, sales and cash flow. In addition, we keep in
telephone contact with corporate executives and arrange
company discussion meetings, track information through the
company web site and participate during quarterly conference
calls. This process is never-ending. In the event of a sale
of the security, we continue to follow the company. We
maintain the research with the view that we might repurchase
the stock at some later date if its share price subsequently
declines to our targeted buy price.
In the face of our
extensive analytical legwork, we are also bombarded by
divergent investment opinions by brokerage firm analysts.
Certain common stocks may be followed by as many as 5-10
different sell-side analysts, with many variations of
opinions. Some reports may be of high quality, whereas,
others may be poorly done. This fact may further complicate
our analytical conclusions as some of these broker reports
may be laced with poor judgment and eventually serve as red
herrings to complicate our investigations.
Ultimately, this
laborious legwork is our sole responsibility. We cannot
blame others for incomplete analysis or faulty research. We
must stand by our substantive analysis and conclusions. But
more importantly, we must have the courage of our
convictions and not vacillate. This ongoing laborious
legwork of maintenance research can also be a tedious
process. It involves a steady stream of corporate
information and misinformation, which we must thoroughly
investigate.
As a final note, one
should consider that our investment portfolios might hold
over 30 to 40 securities as well as 30 to 40 other
companies, which may be in the process of a full-analysis
prior to being purchased. With this extensive research,
there is little wonder that investment analysis remains a 24
hour a day / 7 day a week investigation.
Irwin A. Michael, CFA
