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Successful investing - soaking up information

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Continuing our series on how not to be your own worst enemy. This presentation looks at soaking up information when investing.

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Successful investing - soaking up information

  1. 1. Successful Investing “Soaking up information”
  2. 2. Introduction 1. We are obsessed with learning more and more about less and less 2. J Boorstin “The greatest obstacle to discovery is not ignorance – it is the illusion of knowledge.”
  3. 3. Introduction • Consider: o Book makers are as accurate predicting horse races with 5 pieces of information as they are with 40 pieces o But they are 30% more confident when they have 40 pieces of information o However, computers are more accurate with more information, six pieces of information – 56% and as more comes in up 71%
  4. 4. Introduction • Why? o Computers can soak in a great deal of information quickly and deliver a more positive outcome o Humans have limited processing capacity i.e. we are not computers
  5. 5. “So, information is crucial but what is more crucial is to know what information is crucial” Let’s see how not to overburden ourselves……..
  6. 6. Soaking up information • Generals in battle are surrounded by explosions, smoke, blood and massive amounts of incoming information • The key to the greats is the ability to see what is key, i.e. the vital and critical information, and discard unnecessary information • Key is to look for differences that make the most difference
  7. 7. Soaking up the right information Warren Buffett “I just try to buy businesses with good to superb underlying economics run by honest and able people and buy them at sensible prices. That’s all I am trying to do!”
  8. 8. Soaking up the right information • In practical terms consider: o Valuation – how does it compare to price – seriously undervalued is what is what is being looked for o Balance sheet – is the company strong o Capital discipline – how does it spend its profits – is it disciplined and does capital allocation shown consistent increases in share hold value
  9. 9. Soaking up information- summary o To be successful we need to: • Soak up the right information • Focus on the fundamentals • Ignore all the noise around us