Warren Buffet says he can't predict the market and he doesn't know when a stock is going to go up or come down.
Warren Buffett says "our favorite holding period is forever."
Warren Buffett says "one good investment can make you rich."
Warren Buffett says "if our stocks go down, we're ecstatic, because then we can buy more."
Warren Buffett says the way to succeed in investing is the way Benjamin Graham taught, which is Financial Analysis.
Financial Analysis as taught by Graham is surprisingly easy, at least, if it means you can do some easy things and you see things that are pretty interesting ... like ... thousands upon thousands of companies ... and ... looking at some of them ... a great great many that seem to be on precarious financial footings ... and some that seem to be on very sound footings.
Can it ... be easy?
I went, thinking freely, to the longest list of companies I could find, and looked at charts, starting on page 300. Then I looked at page 301. One year charts. That's what the system gives me. And, I thought, what am I looking for. There was one that looked cheap, but precarious. Still, I logged it. And then there was one that had done something cool, and I logged that. I thought I'd do one more, and started making snap decisions, asking myself "that one? that one? what am I looking for." Then, well, it was a giant peak. My kind of thing ... and in spades. Not so cheap as all that ... trading above $7 ... it was Sky People Fruit Juice! So now I'm gonna own a Chinese fruit juice company because ... it's Chinese Fruit Juice! But what were the ... other ... fundamentals on this one? As is my habit, now, with one click I went to the beautiful financials.
Good, they have revenues, are small but not teeny tiny, at the upper end of teeny tiny, and consistently so, four years slightly declining, and we take the averages over years if we can get them, as Graham taught us, because of cyclicality, but what's down here? Lot's of black, and all looking very spare and orderly, and a solid black earnings line! At the very bottom, it's earnings per share, and you average that out and you get, and then you check that against the price, and the ratio is something like 3, which is a ton of earnings per dollar!
Well, what's the balance sheet like. Get that current assets line, and then get that total liabilities line ... and there's a slight current asset surplus. Hmm, I wonder what the average looks like. But, that's for another time. By this measure they're a little expensive, but not astronomically.
A little puzzled, and a little wary, I decided to look at the details and see if I could glean anything from them. Very businesslike looking wherever I look, for sure. What about this balance sheet? Why isn't that stronger?
Down towards the bottom there's a line I hadn't noticed, Retained Earnings. It's sort of a big number. How does it work, though. I try but can't quite remember. What's this next line? Equity. And below that is Equity and Liabilities. That's the value of the company! Equity, per share ... Earnings per share ... It works out to a four percent return on Equity. Hey, four percent isn't bad!
My chart reading turned up a gem!
I'm working my way towards a dozen like this. Investments. And it's also a thrill ride.
On the monthly chart it has a history of spiky candles. A spiky candle happens when a stock goes up a lot in the beginning of the (period) month, and then comes all the way back down, a lot of the way back down, by the end of the month. If this is up mid - month, I might sell it. Depends what kind of up.
So, what makes this an expert level stock. Well, it's Chinese, it's fruit juice, it's small. It's a great company, so it's likely to move, but the market won't believe. It'll drop again.
But what about Buffett's preference for holding forever? Selling at 40 or 60 will make me a few hundred dollars, but it's holding forever that makes you rich. And yet, from my perspective, it's entirely unjustifiable to hold this, if it rallies. How do I make sense of this? What kind of company would I buy now to hold forever? Anything? I can start to see that this is a reflection of my thinking on the market. I do think about the market, I mean, I do make predictions. Maybe you could call it analysis. I feel like it's still early in a market cycle, not, like, really early, but not late. Still early, just by a bit. Also, I'm predicting a spectacular global economic boom for fifteen years. Once that really gets going it'll carry fruit juice and all other very good things with it to great heights, but at this early stage, things are still up and down ... which is good.
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