Investment Philosophies
Rich Robison
about your philosophy.
My answers are about as different from yours as can be, but I believe
there are multiple valid approaches to the market.
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What's your investment philosophy?
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My philosophy is that stock price and company fundamentals are inexorably
linked, over the long term. If I can find a company that is undervalued
relative to their fundamentals, or find one that has more potential to
grow it's earnings than the market gives it credit for, I've found
something interesting.
I also look for trends as well, though I use them differently.
Sometimes when the company offers a great product that is in my realm of
expertise, and I understand the business model, I'll jump on the stock and
wait for the rest of the market to come around.
The other way I use trends is when it looks like the market has made a bad
call, or an overexagerated call. Then I'll take advantage of market
inefficiencies by betting the other way.
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What types of companies do you look for?
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I like small, well run, overlooked, companies with competitive advantage
and a long term outlook. Sometimes their innovation will be a competitive
advantage, and sometimes their business will involve a very high barrier
to entry.
Fundamentally, I like to see lots of free cash flow, and as little debt as
possible.
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How do you find your companies?
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The motley fool's philosophy mostly falls in line with mine. Sometimes I
will find companies through their writing staff.
I also like to find companies I deal with personally. If I have a good
experience with a company, and I'm a believer there's a good chance others
will be as well in the near future.
Stock screeners are also a good way to find interesting companies with
spectacular balance sheets. That doesn't always tell the whole story
though. A lot of research comes in after the screener.
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What's your typical holding period?
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Warren Buffet once said the ideal holding period is infinite. If you buy
a great company, there's no reason to sell unless they have changed, you
have changed, or you found a better use for your money.
I don't like to play on the short term, because I believe the market is
run by emotions in the short term. The emotional "noise" of the market
decreases over time, trending to zero at infinity.
Typically though, I have found that I usually hold for a couple years.
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What's the most important you have learned investing?
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To be ruthlessly logical. Emotion rules the market, and it'll rule you if
you let it. Psychological studies have been done on people's investment
returns, and those with abnormally low emotions always tend to do better.
If I have a winner, my emotions say to sell and protect my profit. If I
have a loser, my emotions will want to hold it to try and make up my loss.
But in reality, if a company is trending up, it's not a good time to
sell. And if I have a loser trending down, it probably is a good time to
sell.