Tuesday, November 23, 2021

One up on Wall Street - reflections

One of the more recent investing books I've read is Peter Lynch's One up On Wall Street.

The central theme of his book is that retail investors like you and me have an edge vs Wall Street and all its analysts and institutions. Of course, he ran a successful mutual fund between the late 60s to early 90s and has reservoir of experience to draw and reflect on.

So, one thing a retail investor has is being able to see/use/hear/feel/touch a product/service wayyy before wall street  catches a whiff of it - a stock which wall st would consider attractive is one where there are a number of institutional holdings as well as it being covered by analysts in wall st. So, you have time on your side when you spot a new company that does this new thing or makes this new device that you just tried out and thought hey that's good value for money; wall street would have waited on an analyst or twenty to come up with an expose before it makes its round among the street's institutions.

There is also, as Peter puts it, an idea that being successful is one thing but it's important not to look bad if you fail. Sound familiar? I mean, if you have experience dealing with a broker or a personal banker or have had invested in unit trusts/mutual funds, chances are you would have been 'stock-splained' by your agent/consultant/advisor/relationship manager that the lackluster performance of your holdings are due to XXX scenario or a 'macroeconomic tailwind' caused by unexpected breakdowns in high level intranational negotiations over the trade pact for the coming 2 fiscal quarters, or there has been an unexpected movement of the market sentiment which caused the performance of your fund to perform at a level we would like to see improve in the next quarter; in short someone messed up but no one wants to be seen to be the cause of that. The net effect is that fund managers will more likely play it safe or sandbag their results (if at all possible), rather than go heavy in a new company with solid fundamentals and is still in the beginning stages of its growth. Coz, it's better to show your fund managed to return 7% this year than have the story of the fund only returned 3% this year because it managed to get a hold of opportunities which will unfold and blossom over the next 5 years.

Other than that, I suppose being in wall st, a fund manager would be burdened with many unnecessaries which you and I definitely do not have or dreamt would have like an overbearing supervisor who may not understand the stocks/securities you select, do not possess the same skills to analyse them and worst, comes to the job with preconceived ideas and  ill-suited mindset to investing. All of which would serve to frustrate and more often that not, cause you to select stocks which may not be in the best interest of the fund holders. That, and you would have to contend with having to explain to your colleagues why are you buying this and not that, and why at this price and why not at 20% lower; it's good and probably essential that you can explain why you want to buy a stock but if you gotta explain and justify to every other person who happens to share the same office with you, well it can get tiresome, bothersome, and then some.


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