I remember once waking up one morning with a throbbing pain in my index finger. It didn’t seem that serious. So, I decided that a bit of self-medication would suffice. What could possibly go wrong? After a couple of days, the pain got worse. Much worse. The finger had also taken on the appearance of something out of a Tom & Jerry cartoon – red like a tomato and it pounded with the regularity of a metronome. So a trudge to the doctor’s surgery was the order of morning. After a knowing nod of the head and a gentle stroke…
I remember once waking up one morning with a throbbing pain in my index finger.
It didn’t seem that serious. So, I decided that a bit of self-medication would suffice. What could possibly go wrong?
After a couple of days, the pain got worse. Much worse.
The finger had also taken on the appearance of something out of a Tom & Jerry cartoon – red like a tomato and it pounded with the regularity of a metronome.
So a trudge to the doctor’s surgery was the order of morning. After a knowing nod of the head and a gentle stroke of the chin, the doctor diagnosed the problem….
…..He even performed some very minor surgery and the pain immediately vanished. Voila! Job done!
I did ask him if I would be able to play the piano after this. He confirmed that I should, after a couple of days….
…. “That’s a miracle, doc”, I said….
.… “I have never been able to play the piano before”.
He looked at me, and for the one and only time in my life, I heard a doctor groan. I think he added an extra $10 onto the bill, as punishment for the awful joke.
What’s up doc?
Many of us like to think that we can invest, just as I thought that I could self-medicate. And some of us can.
But what if we can’t? What if our portfolios are permanently daubed in red ink, when the rest of the market is racing ahead?
Should we, then, accept that, perhaps, stock-picking is not one of our skills?
Then again, could it simply be a sign that we might have just chosen the wrong stock at the wrong time?
It is often said that time in the market is more important than timing the market. So, hanging onto losers might be a good idea.
After all, didn’t Warren Buffett once say that time is the friend of the wonderful business and the enemy of mediocre?
That sounds great in theory. But how do we recognise a wonderful business when we see one.
Luck vs. skill
Of the more than 700 stocks listed on the Singapore market, some are truly wonderful companies. Some aren’t. Some are absolute dogs.
These (un)wonderful companies can ensnare unsuspecting shareholders and badly damage their portfolios.
Thing is, if we pick stocks at random, we could hit upon a truly wonderful company by accident. It could reward us handsomely over the long term.
But the successful stock picker should be able to replicate the stock-picking process and not simply rely on luck.
Wonderful companies have certain traits. They tend to have high returns on equity. It stands to reason. It is the profit that a company generates for its shareholders.
Return on equity is not rocket science – it is rocket fuel. It can super-charge earnings for shareholders, if used properly.
One of many
But return on equity is just one of the many attributes of wonderful companies. If only it was the only one. Investing would be so much easier for all of us.
There is a long checklist of characteristics that we need to sift through, methodically, to find wonderful companies.
It is only after we have found and bought wonderful companies at fair prices that we can relax and let time work its magic. That is when time becomes the friend of the wonderful.
That is precisely what we do at Stock Advisor. We look for wonderful companies. We don’t rely on luck.
If you want to find out the companies in Singapore that we believe are wonderful, just click here.
It could change the way you look at investing, forever.
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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 Director David Kuo doesn’t own shares in any companies mentioned.