Forum Archive Index - June 2001

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

...Somewhere at an Internet Cafe during World War One in France.

Snoopy: Sit down and take a toast Red Baron.  What you have is a "raw 
bread" understanding of what we are about.  I'll try and put some jam 
on it for you.

Red Baron: You said the first secret of Focus Investing is to sip 
coffee?

S: Yes, sprawl the annual report, broker reports, reviews from the 
net, whatever information you have that is relevant in front of you 
and take time to study them over a steaming cup.   There are no 
shortcuts here, you have to do your homework.

RB: And the second secret of Focus Investing is to sleep?

S: Yes, you will have time to sleep on your decision.  Focus 
investing is something that was invented well before computer 
charting and live data feeds.  With any focus investment you should 
be able to put it under the mattress for a few years and not lose 
sleep over it.   Buying like the market is going to be closed for the 
next 7 years is a good focus investment philosophy.

RB: And the third secret of Focus Investing, is to screen? 

S: Absolutely yes, there are very few companies that meet our strict 
screening standards and qualify as focus investment companies.  

Firstly the company must have real scale, be in the top three in 
their chosen market.  Then the company must be making a top return on 
the shareholders funds in there.  At least 15% for 4 out of the last 
5 years.  Furthermore there must be an overall increasing profit 
trend over the last 5 years, and finally the ability to raise margins 
at a faster than the rate of inflation.  These are the 'Screen 1' 
Focus Investing Group criteria.

Then we check that the company has an appropriate debt level.  This 
is screen 2.

And finally, we check that at the current market price the company 
is still value for money.   A great company, if already overbought by 
the market, might not be a great buy!

RB: So where does hurdling come into this?

S: If it goes right, focus investing is a kind of 'buy and hold'
strategy.   But a very special kind of 'buy and hold' strategy which 
multiplies on itself spectacularly due to the high returns generated 
by the companies you invest in.   Apparently some person in the 
States, either Little Miss Muffet, or Warren Buffet (can't remember 
which) has done well using similar techniques.  

But we all know that for a given company even five good performance 
years in a row does not guarantee a sixth one.   Every year, we 
wheel out the screening test hurdles again and the Focus Investment 
Group companies must jump them.

RB: This all sounds like hard work to me Snoopy.  Wouldn't it just be 
easier to get rich quick?

S: that's what many thought when I joined this sharechat forum RB.  
In late 1999 early 2000 those tech shares were climbing higher 
and faster than your Fokker Triplane.  All you had to do was jump 
aboard.  And then....

RB: You shot me down?

S: Well that too, but it was the tech side of the sharemarket that 
went into the bigger tailspin.  Then from out of the tech rubble 
crawled one Philip Robinson.   He founded our very own "Focus 
Investing Group".  It is one of the forums on the 'Sharechat' site.  
And from there, a wide group of 'sharechatters'  been doing 
spadework.

RB: You speak as though there is still some digging to do?

S: There is RB!   And the more shovels we have, the faster the 
digging gets done!   If you are in the lucky position of possessing 
some old annual reports or one of those sharemarket yearbooks, those 
are really useful tools.  And you don't have to be an accountant 
either (although accountants are welcome).   Our aim is to keep the 
discussion at the level of the Mum and Dad enthusiastic amateur 
investor.   Some of us get extra enthusiastic and the discussion has 
been known to go off on esoteric tangents.   But we don't mind being 
pulled down to earth- really!   After all, if one person doesn't know 
what's going on, the chances are that person will be speaking for 
many!

RB: Well Snoopy, if you are inviting a curmudgened Kraut who doesn't 
speak english as a first language onto the Focus Investing Group 
board, then I guess that truly anyone is welcome there.   Who knows? 
I may even arrive at this Focus Investing Group with a shovel myself 
one day.  We must have another one of these chats some time.  Perhaps 
Christmas day?  It's a holiday.  We could 'toast' it away?

S: 25th December?  Yes, that's still before Armistice Day hits I 
think.  It's a date. 

-The End-  

(Publishing Note:  The  LEARNING TO INVEST series is a 
concept developed by Gerry Stolwyk.   This post has been produced at 
his invitation)


---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
on Pegasus Mail version 2.55
----------------------------------
"Sometimes to see the wood from the trees, 
you have to cut down all the trees."



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