From time to time, I get questions on investing which look simple but are not as easy to answer. One frequent question would be this: “How long does it take to study a company?” On the surface, it looks like there’d be a straightforward answer. Give me an idea on how much time is needed to study a company, the question suggests. Yet as a lifelong student of the investing game, my answer would be just that – “lifelong.” Student for life As an example of lifelong learning, let’s use Super Group Ltd (SGX: S10) as an example. Investors in Super Group…
From time to time, I get questions on investing which look simple but are not as easy to answer. One frequent question would be this:
“How long does it take to study a company?”
On the surface, it looks like there’d be a straightforward answer. Give me an idea on how much time is needed to study a company, the question suggests. Yet as a lifelong student of the investing game, my answer would be just that – “lifelong.”
Student for life
As an example of lifelong learning, let’s use Super Group Ltd (SGX: S10) as an example.
Investors in Super Group who have owned shares since the start of 2010 would likely be a happy bunch. Shares of the instant coffee maker have risen 220% from then to S$1.05 today; over the same time frame, the SPDR STI ETF (SGX: ES3) – an exchange-traded fund tracking Singapore’s market barometer the Straits Times Index (SGX: ^STI) – has generated a return of only 14%.
Part of the reason for Super Group’s rise would be the company’s successful entry into the food ingredients business, selling things like non-dairy creamer and spray- and freeze-dried coffee powder.
By the end of 2014, Super Group’s food ingredients (FI) segment had grown to make up 35% of its overall revenue. You can get a sense of the breakneck pace of growth for the FI segment’s revenue in the graph below:
Source: Super Group’s earnings report
But the growth story for Super Group may not be over yet even after five years – and that’s where lifelong learning about the company can come into play.
As my colleague Stanley discovered last year, the FI segment for Super Group is not as commodity-like as it seems. In this case, Super Group tailors its FI segment products to suit its customer’s needs, making it harder for its competitors to replicate.
Furthermore, the customization at the FI segment serves as a learning opportunity for Super Group about consumer preferences in new markets; these can help the company if and when it eventually introduces its own branded consumer products in said markets.
A recent report (on Monday) from business newswire The Edge talked about the future of Super Group’s Owl business and how it plans to grow through the distribution of the products from Caffe Cagliari, an Italian coffee brand with more than a century of history. To add to that, Super Group is also looking to build more Owl cafes in Indonesia and is also considering entering into the coffee capsule market.
Thing is, the story of Super Group could continue to evolve in the coming years. If we choose to stop learning at a certain point, we may miss threats or opportunities that arise from the changing business landscape that the company is in. The same goes for every company that we’re looking at.
A Fool’s take
Warren Buffett, one of the best investors the world has seen, was once described by his illustrious right hand man, Charlie Munger, as a “learning machine”. Munger said:
“Warren is one of the best learning machines on this earth. The turtles who outrun the hares are learning machines. If you stop learning in this world, the world rushes right by you. Warren was lucky that he could still learn effectively and build his skills, even after he reached retirement age. Warren’s investing skills have markedly increased since he turned 65.”
It is likely that Buffett, at age 84 today, continues learning new things daily. As you may pick up, there isn’t really an end date for learning about investing and businesses.
Here’s a great example. While Buffett is able to size up some businesses and make an investing decision in a matter of days, if not hours, he actually read the annual reports of tech giant IBM for 50 years before he made his decision to invest in it.
If we can dutifully practice lifelong learning, we may stand a better chance of making our stock market investments a success.
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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 in Super Group.