How To Research A Company or do industry analysis
Part 1 : First for industry analysis, read the paper on Trying Too Hard (below). We must be humble in our approach and attitude. Simple is better.
Yarra Square Partners returned 19.5% net in 2020, outperforming its benchmark, the S&P 500, which returned 18.4% throughout the year. According to a copy of the firm's fourth-quarter and full-year letter to investors, which ValueWalk has been able to review, 2020 was a year of two halves for the investment manager. Q1 2021 hedge fund Read More
Part 2 for industry analysis: In the next post will discuss Warren Buffett’s advice on how to research a company.
Part 3 for industry analysis: We will examine a speculative mining company.
TRYING TOO HARD by Dean Williams
The title Marshall mentioned, “Trying Too Hard”, comes from something that happened to me a few years ago. I had just completed what I thought was some fancy footwork involving buying and selling a long list of stocks. The oldest member of Morgan’s trust committee looked down the list and said, “Do you think you might be trying too hard?” At the time I thought, “Who ever heard of trying too hard?” Well, over the years I have changed my mind about that. Tonight I am going to ask you to entertain some ideas whose theme is this: We probably are trying too hard at what we do. More than that, no matter how hard we try, we may not be as important to the results as we’d like to think we are.
But I also hope to persuade you that’s not all bad. Sure, we get an uncomfortable feeling when we question the value of some of the things we’ve thought we’re supposed to do . . . . but the rest is pure good news. Complete with more time to do the thing we’re well-suited for, greater efficiency in own companies and, probably, better results for our customers.
Here are the ideas I’m going to talk about: the first is an analogy between physics and investing. With apologies to anyone who knows anything about physics—or about investing, for that matter–let me put it this way: The foundation of Newtonian physics was that physical events are governed by physical laws. Laws that we could understand rationally. And if we learned enough about those laws, we could extend our knowledge and influence over our environment. That was also the foundation of most of the security analysis, technical analysis, economic theory and forecasting methods you and I learned about when we first began in this business. There were rational and predictable economic forces. And if we just tried hard enough. . . . If we learned every detail about a company. . . .If we discovered just the right variables for out forecasting models…Earnings and prices and interest rates should all behave in rational and predictable ways. If we just tried hard enough.
Read more on industry analysis below.