In investing (like with many things in life) it is not always possible to have all the right answers but it is important to ask the right questions. In line with this philosophy, and taking a cue from Ben Graham’s “Intelligent Investor” and Basant Maheshwari’s “The Thoughtful investor”, I have called this blog “The Curious Investor” to highlight the importance of always being curious and asking the right questions.
Most investment decisions rely on a handful of key questions and variables. While it is important to conduct a wholistic analysis of any industry/company one is analysing, it is important to wrap up this analysis by asking the critical questions that are likely to contribute most to the investment outcome.
I will analyse a company/sector and end by asking the key questions that are likely to determine the success of the investment. I will try answering these questions (based on my limited understanding) or decide that they should go (in the words of Charlie Munger) in the “too hard (to answer) pile”. I will also write about any interesting investment ideas/concepts that I come across during my readings. The approach that I will always take is that of a fundamental long term value investor.
Approach to analysing stocks
My approach to analysing investments has been influenced by the Applied Value Investing course at IIM Ahmedabad that I had the fortune of undertaking in my second year. I will be approaching most investments with at least a 5 year (often 10+ year) time horizon.
My fundamental belief is that it is extremely difficult (at least for me) to predict stock price movements over a 6-12-18 month time horizon but a deep dive into a company’s fundamentals can give us some reasonable estimate of the company’s prospects over 5-10 years. A lot of the analysis will be backward looking, analysing financial statements, assessing the business quality, management quality, a company’s moats etc.
Only once I get some confidence on past business and management quality, do I try to assess the valuation and future prospects of the company. This approach by definition would mean that I miss out on a lot of very young companies and turnaround companies. While these may be some of the most lucrative investment opportunities, I must admit that (at least as of yet) I do not have the capabilities to assess them with a reasonable amount of confidence, hence I will stay away from them.
I make minimal use of financial projections and financial modelling. While I do see their value, for me financial projections are largely thought experiments, to see what the value of a company should be under reasonable circumstances. They are just (what I believe are) reasonable assumptions about how a company should be able to perform over the long term and what I, as a conservative investor, would be willing to pay for it.
Disclaimer: Please note that I am not a financial advisor and anything I write is not investment advice. Please do your own research or consult a financial advisor before making any investment decision. Please assume that I have a position in any stock that I write about.