Value Library
The following is an
excerpt from the ABC Perspective - July 2004 - Pg. 1
Be Inquisitive
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"I’m not smart, but I like to
observe. Millions saw the apple fall, but Newton was the only one
who asked why."
Bernard Baruch |
I was once asked by a
longstanding client if there was a secret ingredient or
magic formula to successful stock picking. Without any
hesitation I replied an unequivocal no. But upon further
reflection I immediately called my client back to declare
that while there might not be a secret ingredient, there
was, in fact, a common thread to investment success. That
common element, in my opinion, was “to be inquisitive”.
In our frenetic financial
world, we are constantly bombarded by facts and figures.
There is a never-ending flow of information. Some of this
flow is useful but the bulk of this knowledge is irrelevant
to many investment decisions. The challenge to us as
investors is to deflect the unimportant facts and to
concentrate on what will be germane to profitable investment
analysis. Moreover, another key to investment success, I
believe, is to use the relevant information sagaciously. As
investors, we must dissect this data through shrewd
questioning and serious analysis to ultimately produce a
well-thought-out conclusion. Once we have formulated an
opinion we can then create and execute a credible investment
plan of action.
The importance of being
inquisitive cannot be overemphasized. It is only through
diligent questioning that we can acquire more valuable input
to produce greater confidence and conviction to carry out our
investment responsibilities. From my experience, the greater
the investment knowledge that a portfolio manager has to make
a financial decision, the greater the likelihood of monetary
success.
But being inquisitive is
easier said than done. As analysts, we must dig deeper and
deeper into potential investments. Our questioning must probe
for a certain spark or a different investment spin.
Unfortunately, this is often a tedious process. However, with
a fresh analytical interpretation this effort frequently
produces significant incremental profitable returns. The fact
is: when all is said and done, it is a labour well spent.
Irwin A. Michael, CFA
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