1 Simple Investing Tip To Help You Win in the Stock Market

A few days ago, I had watched a fun TV show called Baggage Battles.

The show covered the adventures of a few auction bidders who would purchase lost baggages from airports, police stations, and the like. After winning auctions for the lost baggages, they would then turn around and try to sell the contents of the baggages for more than what they paid for.

The challenge comes from the fact that most of the lost baggages are unopened, so the auction bidder would have to make guesses as to which baggage may be valuable.

There’s a key moment when an expert appraiser provides a value for the auction items. This is the moment when the auction bidders find out if they had managed to snag a bargain or had overpaid.

Looking inside the baggage

It occurred to me that stock market participants sometimes behave in the same way as the program’s auction bidders. They would bid for shares of a company and pay a share price which they feel is a good price to pay. After paying, the participant would wait for the market to give a new value to the shares they just bought.

But, there’s one key advantage that stock market participants have over the lost-baggage auction bidders – stock market participants have the choice of looking inside the “baggage” before making any bid for a stock.

It’s not even that difficult to obtain the materials needed to get that inside-look; many listed companies have to make mandatory quarterly, half-yearly, as well as annual filings of their business results with regulators. These can be easily obtained over the internet.

Furthermore, investors also have the luxury of time to study the “contents” of a company; there’s no real pressure to submit an auction bid within a set timeframe.

Foolish summary

At the Motley Fool, we are fans of looking at the business behind the ticker.

By looking behind the ticker, you may have found names such as Riverstone Holdings Ltd (SGX: AP4). The rubber glove maker’s earnings per share had increased by nearly 60% from 2010 to 2014; as a result, its shares had jumped by 217% since the start of 2010.

To get to those returns, we have the choice of behaving like an auction participant or investor. In my view, we may be better off being the latter.

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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 company mentioned.