3 Quick Snippets on How You Can Succeed As an Investor Today and For the Future – Part 1

Insights about how we can invest successfully for the future can come from snippets from interviews of successful investors.

In here, I’d be covering useful portions of interviews from a trio of investors who have demonstrated outsized performance over long periods of time.

The first one’s from Francois Rochon, the founder and portfolio manager of Giverny Capital. Rochon had led Giverny Capital to 15.5% annual returns over the 20 years ended 2013. That would have turned every $1 in 1993 to more than $17 by 2013.

Without further ado, let’s jump right into a snippet from an interview Rochon had:

“It’s not easy but I try to distance myself from the price when I’m in the studying phase, as I try not to know nor focus on what the price of the stock is. I also look at the company as if it were a private company that I could purchase and then when I decided that it meets all my criteria, I tend to look at price.

Consequently, the last phase of the analysis would be to compare what I think the company is worth to what it is trading on the stock market.

Many value investors do it the other way around, as they find a cheap stock and then try to figure out if it’s a great company. When you take such an approach, I think you become biased. Your company list will be considerably biased: You do want to buy these stocks because they are cheap and then you find reasons to justify their purchase as great companies.

On the other hand, I try to be more objective and look at hundreds of companies and try to find the ones that I would like to own for the next ten years. And only then, I try to figure out what the price should be and wait for a better opportunity if the price is too high.”

When it comes to studying stocks, Rochon was steadfast in his belief on a particular sequence. Point is, he believed that investors should study a business first before they even look at the share price.

At the risk of confirmation bias, I must say that I agree with his assertion.

Along with this, Rochon also pointed out a flaw at starting with cheap looking stocks. In his view, the facade of cheapness may cause the private investor to try too hard to justify the attractiveness of the share as an investing opportunity.

When you think about it, the share price alone does not contain much useful information for you. So why look at the share price first?  We could do without this bias if we want to get better at investing.

This is the first snippet. Stay tuned for the next snippet tomorrow!

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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 doesn’t own shares in any companies mentioned.