information: developing an edge

having better information sooner

Everyone has different education, training, life experience and interests.

Some people know a lot about cars or motorcycles or boats; some really like to shop; others enjoy eating out.  Some people are deeply involved in social media and are aware of the latest tech start-ups.  Some people have health issues that force them to learn a lot about medicines or even about trends in healthy eating.

Personally, over the years I’ve developed an expertise in retail.  Yes, I like to shop.  But retail also has the advantage that I can walk through stores or websites and be doing research.

I also like computers and electronic gadgets, which has drawn me into the technology arena.  I’ll confess I didn’t see the iPhone coming, but I certainly understood the iPod very early on.

 

Once you’re conscious of the fact that you have specialized knowledge, you can make a mindset change.  You can begin to ask yourself whether there’s a way to apply this information to the stock market.

 

My wife introduced me to Toys R Us when it was in its infancy.  My sister-in-law pointed out Chicos long before it was a Wall Street star.  When we had kids in the house I used to see what video games they and their friends played, what clothes and shoes they preferred, what music they listened to…

All of this can lead to profitable investment ideas.

 

At the moment, I think the biggest opportunity for you and me is to understand the behavior of Millennials.  Many professional investors live in a gated-community hothouse world, divorced from everyday life.  They’ll be among the last to know.

But everyone has to decide for himself what he’s willing to put research time and thought into.

concept vs. valuation

That’s the good news.  Our daily lives can be a rich source of investment concepts.

For growth stocks. that’s sometimes enough.

…but not always, and definitely not for value stocks.

To increase your chances for success, you should learn to read company financial statements.  A financial accounting course (not bookkeeping) at the local community college should do the trick.

It would also help to develop some ability to judge how much of the information you have is already factored into the current share price.  The local CC should help here, as well–although you do not want a course taught by a broker or financial planner who’s trolling for new clients.  You could also check out the PSI blog post archives.

 

 

2 responses

  1. Essentials of Accounting by Brietner and Anthony is a terrific and efficient method of learning the basics of accounting – I first came to know this book when I was about to matriculate into an MBA program – they sent it to all the first year students (back then, it was just Anthony). Here is a link to the book on Amazon: http://www.amazon.com/Essentials-Accounting-11th-Leslie-Breitner/dp/0132744376/ref=sr_1_1?ie=UTF8&qid=1409247516&sr=8-1&keywords=essentials+of+accounting#cm_cr_dpwidget

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