In his book, Laughing at Wall Street: How I Beat the Pros at Investing (by Reading Tabloids, Shopping at the Mall, & Connecting on Facebook) And How You Can, Too, Chris Camillo shows readers how retail investors, like you and me, can amass wealth and beat the fund managers at the same time.
The Power of Observation
Chris promotes in his book that by observing the world around him, he easily turned $20,000 in early 2007 to over $2 million in three years. According to him, game-changing information can be hidden in everyday life while watching television, reading tabloids, working at the office, shopping at the mall, eating out at restaurants or just surfing around in social media websites like Instagram, Facebook and Twitter. Such information is slow to catch on with those managing huge mutual funds.
I agree with what Chris teaches in his book. I have found my fair share of companies to invest in over the years by daily observations. Philip Fisher, the man who partly inspired Warren Buffett, also advocates visiting businesses that you like to get a feel of how things are going.
So, how can you, as an investor, be like Chris Camillo and create your own winning portfolio? Let’s go on a ride in a small part of Singapore to find out more.
Imagine you are heading to Bugis Junction, which is coincidentally operated by Capitaland Mall Trust (SGX: C38U), to get an IT gadget for your friend’s birthday.
While on the bus run, you spot a sparkling new construction underway and that happens to be the extension of Raffles Hospital by Raffles Medical Group Ltd. (SGX: BSL). You reckon that since the hospital is expanding, it should have growth many years down the road.
You alight at the bus-stop in front of Bugis Junction and head to Challenger Technologies (SGX: 573) to grab the present. As you are making your way to the outlet, you notice the mall is bustling with people and shoppers carrying trolley-loads of sale items. You think to yourself, “Retail slowdown? What slowdown?”
You enter the Challenger store, get the present and are waiting to pay. As you are queueing, you notice that its house brand products are going at a huge discount and they seem like good value. You have read somewhere that such house brands allow a firm to increase their profit margins.
Upon payment, the cashier asks if you are a Challenger member and since you are not, if you would like to sign up for one. The perks are enticing, and you sign up for it. Membership programmes are usually used by companies to encourage repeat shopping. You come to a conclusion that Challenger should be worth a closer look once you get back home.
You get hungry, and you are craving for a curry puff. As you head your way to the basement, your attention is caught by your favourite curry puff stall, Old Chang Kee (SGX: 5ML). You see a long queue that is extending all the way to the adjacent stall. You also notice that it is selling a new version of its curry puff, BBQ Chicken ‘O, and decide to give it a go. The new puff is delicious. Will this new puff be a game-changer for Old Chang Kee, you wonder.
You also remember reading recently that Old Chang Kee is making its foray into the United Kingdom by opening an outlet in central London. You feel the business will take off in the city since Londoners usually take-and-go during lunch time.
As you make your way back home, you decide to get some groceries from Cold Storage, which is owned by Dairy Farm International Holdings Ltd (SGX: D01). You notice it is a huge store and there are kids in tow with their parents. You think to yourself that brick-and-mortar stalls have their place in Singapore since they encourage bonding between families.
The above is just a simple example of how daily observations can give you an upper hand in investing.
We, as consumers, are the ones who use such products and can spot trends way before analysts do. We can observe the queue at public-listed restaurants, retailers and the likes. We can try the products and decide if they will be revenue generators for the company.
However, do note that just because a company has launched a new product, it does not automatically mean that it will become a sound investment. Profits, balance sheets, cash flows, valuations and other aspects of a company’s fundamentals all come into play when trying to make an investing decision.
Investor Peter Lynch once said, “Your investor’s edge is…something you already have. You can outperform the experts if you use your edge by investing in companies or industries you already understand.” That’s apt here, isn’t it?
For more (free!) investing tips and tricks and to keep up to date on the latest financial and stock market news, sign up now for a FREE subscription to The Motley Fool's investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.
Also, like us on Facebook to follow our latest hot articles.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P owns shares in CapitaLand Mall Trust and Raffles Medical Group Ltd. The Motley Fool Singapore has recommended shares of CapitaLand Mall Trust, Dairy Farm International and Raffles Medical Group Ltd.