I always try to steer clear of bragging, but I hope you’ll allow me to share I nice honor that I was recently given.
In an article on US investing website Benzinga, I was named one of “The World’s Top 10 Financial Bloggers.”
It’s hard to not be excited about something like that.
The article was based on data from the website TipRanks, which holds bloggers and financial experts accountable for what they write by tracking how their stock picks perform over time. According to this data, 69% of the 500 recommendations that I made between 2009 and 2014 were successful and, on average, returned 16.8% in the year following the pick.
How did I manage this?
I wish I could say it was just because I’m so gosh darn smart. But I’ve been doing this long enough to know that Lady Luck deserves some of the credit here. If the timeframe were slightly different, or if the data had been tabulated in another way, it could have been somebody else in the No.7 spot on that list.
And yet, I don’t believe it was just luck. If I did, I wouldn’t be working at The Motley Fool and writing about investing on Fool.de.
There are ways to invest well, and, when you stick to them, good results tend to follow.
Over at Motley Fool CAPS – a Motley Fool service focused on U.S. markets that is set up to keep investors and writers accountable – I’ve outperformed nearly 97% of the other investors and beaten the market on almost 61% of my picks.
But it’s not just about me. If you go back to that article on Benzinga, you’ll notice that three of the 10 names on there (Tim Beyers and Rich Smith in addition to me) are from The Motley Fool.
So it’s not solely about skill, but it’s not just luck either.
What is it then? Do we put something in the water at Motley Fool headquarters?
I believe a lot of it has to do with what long-time Fools would simply call “good Foolish investing.” And, in particular, I think the following three points are critical.
1. Buying a business.
I don’t buy stocks. I buy businesses.
I might as well have those two sentences tattooed on my chest (and there are plenty of places here in Berlin to do that!).
A stock is a piece of paper that does very little on its own. A business is a living, breathing entity that sells a product that customers (hopefully!) want and need. A stock may go up or down in value tomorrow or next month. A good business is one that will produce more profit over time, and thereby make an ownership stake in that business more valuable.
If the list on Benzinga was of bloggers that did the best job predicting stock prices, I would have been far, far, far off the list. But I don’t predict stock prices, I analyze, value, and buy businesses – and tell Fool readers about the best opportunities that I find.
2. Buy for the long term
The data from TipRanks is based on the one-year stock performance after bloggers made their recommendations. So the results don’t truly show what owning for the long term does for my investment picks.
However, even if my success here isn’t based on multi-year performance, I’d argue that the performance is driven by multi-year thinking. I believe that even one-year performance will tend to be better when you’re thinking about the big picture, as opposed to trying to use your crystal ball to predict things that will move a stock over the next 12 months.
Furthermore, over at Motley Fool CAPS, my best performers are some of my longest-term picks. Trinity Industries has beaten the S&P 500 for me by 414 percentage points. I made that pick in early 2009. Disney is beating the S&P by 189 percentage points. I picked that one in mid-2009. And since I rated private equity company Blackstone an “outperform” all the way back in February 2008, it’s outpaced the S&P by 120 points.
And what of the “500 recommendations” that I made according to TipRanks? That sounds a lot more like a day-trader than a long-term investor. While I have shared views on many stocks, I recommend and re-recommend my best ideas. For instance, TipRanks shows that I’ve made 10 recommendations on Citigroup and 15 on Bank of America.
In both the TipRanks and CAPS data, I have very few “sell” recommendations. I do sell stocks from time to time. And I’ll often say that I wouldn’t buy a certain stock. But very rarely would I want to short – or bet against – a stock.
This “long bias” works particularly well during a bull market. When we have the next big stock slump, it won’t treat me as well. At least, for the short period of time that the slump lasts.
When we look at longer periods of time though, stocks have gone up. According to the Deutsches Aktieninstitut, the DAX index has returned on average 8.7% per year over the past 30 years. And we know that there have been some terrible stretches for stocks during those three decades.
In other words, betting against stocks is not a sound long-term strategy.
As with any pursuit, the more you learn about investing, the more you realize you still need to learn. It’s nice to be called one of “The World’s Top 10 Financial Bloggers” (or one of the “Financial Bloggers With The Best Track Record” as ValueWalk put it).
Yet I know that in order to continue delivering great investment ideas to the Fool community, I’ll need to continue to explore and learn. And you can trust that you’ll find those learnings – and plenty more investment ideas – available to you on Fool.de.
Bis zu 130 Mrd. US-Dollar investiert Investorenlegende Warren Buffett in nur ein einziges Unternehmen. Das zeugt von riesigem Vertrauen in das Zukunftspotential.
Buffett hat so einige Mega-Milliardeninvestments in seinem Portfolio. Wir haben sie näher analysiert, und angesehen, inwieweit sie sich zum Nachahmen eignen.
Matt Koppenheffer owns shares of Bank of America, Citigroup, and The Blackstone Group. The Motley Fool recommends Bank of America and Walt Disney. The Motley Fool owns shares of Bank of America, Citigroup, The Blackstone Group, Trinity Industries, and Walt Disney.