RL157 - The Art of Long-Term Investing, Part 2: Key Business Factors to Consider
On the Retirement Lifestyle Show, Roshan Loungani, Erik Olson, and Adrian Nicholson continue their discussion on the art of long-term investing - part 2. They break down the key features you must consider in a business before investing in it.
[00:00] Introduction
[03:01] Recap of the Art of Long-Term Investing Part 1
[04:57] The Benefits of Reviewing a Company's Business Model
[07:08] Market Share and Room to Grow
[12:07] Why You'd Want to Invest in a Company with a Sustainable Competitive Advantage
[19:39] How to Conduct a Business Model Examination
[23:33] You Must Understand Where the Company is Investing It's Cashflow
[27:00] Assess Management Quality Before Buying Stocks
[33:00] Median Market Capitalization
[34:10] The Big Question: What Could Go Wrong?
[40:03] Have Some Knowledge of the Company You're Investing In
[42:38] Price Evaluation Metrics
[46:20] Valuation Assessments and the Margin of Safety
[52:30] Holding a Stock For At Least 2 Years
[55:55] Question: Why am I Right and Why is the Market Wrong?
[58:23] What Percent to Buy in a Company
[01:02:10] What to Sell to Buy a More Lucrative Stock
[01:09:42] Why Roshan Settled on This Particular Process
[01:11:03] Parting Thoughts
For more links and the full show notes keep scrolling down!
Roshan Loungani can be reached at roshan.loungani@aretewealth.com or at 202-536-4468.
Erik Olson can be reached at erik.olson@aretewealth.com or 815-940-4652.
Adrian Nicholson can be reached at adrian.nicholson@aretewealth.com or at 703-915-8905.
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Full Show Notes:
Why You Need to Evaluate the Management of a Company Before Investing
You must understand how management works before investing in a company. This can prove to be a challenge because some of it you have to interpret based on looking at their historical actions. But the most basic question is, "why do I like management?" And it's phrased that way because if you don't like management, you should not invest in that company. They are managing your money, and if you don't like them, don't trust them, or don't like how they're making decisions, then that's a pass - no matter how good or cheap the business is. Most successful investors stress the importance of a company's management because there are no bad companies; we only have bad managers.
Identifying Stocks to Hold Forever
How do you research stocks you can hold for the indefinite future? These are the types of stocks whose companies are solid and profitable. They are very clear about their business model that, barring some dramatic turn of events, you can feel great about owning them for the long haul. Ideally, you should be looking for companies that are growing so much and, in theory, should keep growing. The flip side is that you also want to buy them at a good price, which makes it tough. So if you find a stock with consistent growth over ten years at a good price, you should keep it. However, not all stocks are created equal, and identifying the right stocks to hold forever can be challenging. It requires thorough research and a lot of due diligence. By considering the company's competitive advantage, financial health, leadership team, and industry trends, you, as an investor, can make informed decisions and build a long-term portfolio of profitable stocks.
Links and Resources:
Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett
All opinions expressed by podcast hosts and guests are solely their own. While based on information that they believe is reliable, neither Arete Wealth nor its affiliates warrant its completeness or accuracy, nor do their opinions reflect the opinion of Arete Wealth. This podcast is for general informational purposes only, and should not be regarded as specific advice or recommendations for any individual. Before making any decisions, consult a professional.