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Great Stocks Don’t Make You Think! – Singapore Edition

Motley Fool co-founder David Gardner once wrote about a timeless piece of advice on picking great stocks. In it, he talked about one of the greatest financial investments he ever made, and how he picked the stock.

Below is a key excerpt from his article. You can read his entire article here on fool.sg.

In 2008, I read an excellent book called Don’t Make Me Think! by Steve Krug. Near as I can remember, it contains no mention of the stock market, investing, or 100-baggers. It’s just a very readable, insightful book on Web design. He writes:

“People often ask me: ‘What’s the most important thing I should do if I want to make sure my website is easy to use?’ The answer is simple. It’s not, ‘Nothing important should ever be more than two clicks away,’ or ‘Speak the user’s language,’ or even ‘Be consistent.’ It’s … ‘Don’t make me think!’ … It means that as far as humanly possible, when I look at a Web page it should be self-evident. Obvious. Self-explanatory.”

This strong piece of investment advice from me to you is going to sound similar: When we look at a great stock, it should be self-evident. Obvious. Self-explanatory. Great stocks shouldn’t make you think.

Coming back to the local, investing context, we could view it this way – SGX companies which are obvious and self-explanatory the moment we look at it.

In other words, are there SGX shares which don’t make us think?

Shares which don’t make us think

To find companies which don’t make us think, we could start with companies which we can understand. A company which can be easier to understand might be a company that we come across in our day to day lives. A company like Japan Food Holdings Ltd (SGX:5OI). In this case, Japan Foods serves up affordable japanese fare like ramen (Ajisen / Menya Musashi), and gyoza (Osaka Ohsho). To start researching the company, we could just walk into any of its restaurants, and have our lunch or dinner there.

But maybe Japanese food is not your thing. So, if you like shopping, then looking into a Real Estate Investment Trust (REIT) like Capitamall Trust (SGX:C38U) could make better sense. The REIT counts malls such as Raffles City, Plaza Singapura, and Bugis Junction under its wide property umbrella. It collects rental fees from almost 3,000 leases, and pays out 90% of its profits as dividends.

Foolish Take away

In case you, the Foolish reader, are wondering why I am referring to David Gardner’s article about picking great shares, consider this: his September 1997 pick of Amazon.com was been more than 100-bagger. That’s a return exceeding 100 times his invested cash.

So, if you think that 100-baggers are awesome (like I do!), then note this down. That  100-bagger for Amazon.com took a whole 16 years before it could materialise. That would mean 16 years of understanding the news which comes out about the company, 16 years of understanding the industry that it operates in, 16 years of knowing who its competitors are, and — you guessed it — 16 years of a whole lot more things to come.

One way you might make it easier for yourself in this long term journey would be to choose companies which are self-evident to yourself.

Continue studying and remember to circle back to let us know what you have learnt. We all will be better enriched from our shared Foolish experiences.  For more Foolish thinking, sign up for a FREE subscription to The Motley Fool’s weekly investing newsletter, Take Stock Singapore. Take Stock Singapore provides you with investing tips and tricks, and teaches you how you can grow your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares Amazon.com.