Invest in Companies not The Stock Market

I just read a recent Buffett interview where he stated once again what his investment style is. He does this over and over again so that more people can understand his message.

When the world's third richest man and it's most successful investor speaks, we should listen.

"The stock market is there to serve you and not to instruct you. That is the key to owning a good business and getting rid of the risk that would otherwise exist."

Here are some other words of wisdom from the master;

• volatility is nonsense, it doesn't matter to real investors
• its impossible to do well if you go to bed every night worried about price
• the actual business is what actually determines risk
• understand the economics of the business
• risk is heightened because you don't know what you're doing
• know who is running the business
• pay a sensible price for the business and risk is lessened
• when you own an index you don't understand businesses
• for most investors index funds with a 90/10 split is appropriate

Lots of investors right now are selling all their funds and ETFs because, like White House employees they live in fear of a market crash. It is that same fear that has allowed some people to just sit on the sidelines in cash during this last 10 year bull market.

Think of your money invested as businesses and NOT stocks to be bought and sold. Focus on long term returns.

"The fretful disposition is the enemy of long term performance" - Charlie Munger

Get to know what and more specifically who runs your business. What business are they in and do you understand how they make money?

The stock market is just one big pricing machine where you go to buy a business.

We can't all be Warren Buffett, I get that. We can learn and heed his teaching and not be scared out of our positions.

In our retirement accounts I never sell what we own unless that business is really under performing. I don't worry about it, nor do I look at the portfolio more than quarterly to blog about results.

Each quarter I survey the cash in the account either through deposit or dividend income. I then look for buying opportunities from a watchlist of businesses I would like to own.

Businesses NOT Stocks

Using that theme here are some businesses I don't own, would like to own and will own as more money flows into our accounts.

Would you like to be in the children's toy and entertainment business? If so check out Spinmaster (TOY). The stock is now on sale 20% off it's 52 week high. Do you think it's a good business?

Beta: 0.42

ROE: 36.7%

Forward P/E: 24

EPS Growth: 22%

Revenue: $1.6B, per share =16.2

Debt: measly $33mil
Dividend: 0

Price: $50.46

52 week high: $61.76

All they do is make money in this area of the market. With the holiday shopping season soon upon us, you ask yourself, is this a good business for me to own? This is a Canadian success story that not many people know about. I am in no hurry to own it but it is a strong BUY for me and sometime by year's end I will buy it. NOT advice for you to do the same as I don't know your personal situation.

Let's look at one more great business and Canadian Success story. Do you think convenience stores/gas stations are good businesses? Are they going to disappear with the advent of electric cars? I'll worry about that when all those highway rest stops have been converted. For now Alimentation Couche Tard (ATD.B) is a great business.

Beta: 0.61

ROE: 24%

Forward P/E: 18.4

EPS Growth: 47%

Revenue: $51.3B, per share =91

Debt: $9B
Dividend: 0.64%

Price: $63.15

52 week high: $67.96

Financials were just released and the company hit another home run. Everything is up and the company just continues to spit out cash. 

If you don't already, think of your investments as businesses and not stocks. You will be less likely to sell them at the first sign of bad news.

Don't listen to mainstream TV business gurus or professional money managers. They get paid to trade stocks for fees. We don't. We buy businesses and hold  for the long term or until management decides to blow up the balance sheet.

Couche Tard and Spinmaster are just great businesses to own in my opinion.

Here are some others for you to study and research using the same metrics as above; DOL, TFII, MTY, OTEX, DSG, SHOP, CSU, KXS and PLC.

I NEVER USE MY RETIREMENT MONEY TO TRADE IN AND OUT OF 

STOCKS!

Looking for Saving Ideas so You Can Invest? 

If you are looking at ways to save money this new book The Cashflow Cookbook can help you find some savings to then use to invest.

If you are having trouble getting your financial house in order and organized then you need to read Worry Free Money. 

If you are further looking for portfolio ideas then you might find my review of The 6-Pack Portfolio a way for you to get started on your investing journey. All of our retirement money is invested in this manner. We just hold more than 6 positions.

If you want to read more about the theory and methodology of some of Canada's professional investment/portfolio managers then you need to pick up a copy of the book 'Market Masters'. Robin Speziale conducts interviews based on a set of pre-arranged questions. This will give you a real insight into how others invest money and how they think. A must read!

What businesses do you own and would never sell?