I could list a hundred quotes of successful investors that espouse the importance of reading to investing success. A student once asked Warren Buffett how best to prepare for an investing career. Buffett thought for a few seconds and then reached for the stack of papers he had brought with him.
“Read 500 pages like this every day,” said Buffett. “That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”
So here are some of my picks from my reading over the last couple of weeks for you to browse this weekend and make up some of your daily 500 pages.
- The Value & Opportunity blog has an interesting play on a recovery in Emerging Markets without the usual equity risk
- Greenlea Lane Capital did a presentation on Amazon as a value investment, you may scoff at the idea, but it actually makes a pretty good argument and I’m almost convinced. Well worth a read.
- Hedge Fund Solutions published a list of stocks with catalysts – activist investors involved, value realization could be on the horizon for these stocks.
- A commenter helpfully linked this report on Korean preferred stocks and the attractive valuations (thanks again to Charles Hang). This followed on from my post on a Korea Investment fund that is exploiting the opportunity.
My secret confession
I am going to admit something which is rather embarrassing for a value investor – despite all the said important of reading, I don’t actually like it. I’m saying this just because I’m sure I’m not alone, but everywhere I hear people say how they love reading through 10-K’s, footnotes and all, as well as lengthy research reports. Sometimes I wonder if there is something wrong with me (ok I know I’m at least a bit odd) but when it comes to reading, I just don’t enjoy it. I find it hard to stay focused, after a while words go in but have no impact. My memory is so bad that I don’t even remember what I’ve read the day after – why do you think I write all my thoughts down on this blog!
As you can imagine, this makes investing that bit tougher for me, because reading is essential, and whether I like it or not, before I tell my broker to buy, those footnotes have to be read in their entirety, and understood.
I’m a bit lucky in one respect, that I enjoy reading non-fiction more than fiction (which apart from Harry Potter and Lord of the Rings, I’m am a stranger to) and reading books on investing and stocks is the one thing I can read with enjoyment. Unfortunately that doesn’t extend to Annual reports and 10-K’s, which on the whole I find rather dull.
Maybe this isn’t surprising given my background, I have a degree in Mathematics, which I have excelled in all my life. Give me a huge dataset of numbers and symbols and I’m happier than with a stack of papers to read. When I analyze stocks the first thing I look at is the balance sheet and cash flow statement. That’s where I get my enjoyment. Finding a company generating 20 cents in cash flows and selling for a dollar is where the magic’s at. Then I do the painful part of reading, and usually that will unfortunately reveal some nasty secrets of why that stock is trading for a dollar.
But when I think of all the reading I do in a day, I’m sure it is about 500 pages. But of course, it isn’t useful reading, it is the type of reading with no value. Reading news websites, emails, blogs (ok some of them have a lot of value) is time that would probably be better spent reading more 10-K’s, or reference books.
For those that don’t know, Lent started this past Wednesday, and until Easter I have decided to give up television (including Youtube – my guilty pleasure). For me this will be a dramatic change to my lifestyle – I love TV and especially Youtube. But so much of my time is spent unproductively on it that I think it is time to try a change. I plan to use this extra time to be more effective, efficient and strive towards my personal goals. Part of that is going to be reading, both for pleasure, but also for investing. Hopefully I can discover the joys of reading and get into the good habbit of reading a lot.
and a quick Portfolio Update: I said I would go long WKOF.L at the end of April when I had switched some funds about. I found a work around and am now long WKOF.L. The holding is 9.6% of my portfolio, cash is down to 10%. I don’t intend to increase the position unless the price materially declines.
2 thoughts on “Reading”
On AMZN (I’m not long or short and probably will never have a position in this name).
The crux of his argument lies on page 39. The table attempts to say that a company with a P/E of 39 is generating outsized ROIC and earnings growth. However, he’s mixing and matching to suit his investment case.
Either compare “normalized” AMZN (a no-growth company) on all three metrics (ROIC, earnings growth and P/E) or on an actual basis.
On a normalized basis, ROIC and earnings growth would be substantially lower.
On an actual basis, P/E would be substantially higher.
It’s a disingenuous analysis and does not sway me.
I feel the exact same way about reading, and yes the American SEC filings are just absolutely horrible! The Earning call transcripts are a lot easier to read (without Falling asleep) as are normal European anual/quarterly reports.
Kudos for reading so much anyway and for writing this blog :o)