It’s day 14 of my trip to Indonesia with my wife Sam and I have happened across a wifi connection so I thought would take the opportunity to write a quick post. I have spent the last couple of days on a boat living on the sea inside the Komodo National Park, which is an absolutely beautiful part of the world. Over the last few nights on the boat I have been reading a great book about Sam Walton, the founder of WalMart. The book is called “Made in America” and tells the story of the famed American family. Now this post isn’t about the book actually, although it is a great book and I recommend it as well, but rather something I thought was really interesting about Sam Walton and how he viewed stocks and the stock market and what I think investors can learn from it.
In one of the most recent chapters I read, Sam describes his thoughts leading upto WalMart going public and in particular he gave his thoughts about Wall Street analysts and how people trade stock. He thought it was amusing that when they would release their quarterly results, having beat expectations, and some analysts would report that investors needed to absolutely sell the stock now “because at $42 per share this thing has run it’s course”. Sam goes on to say that he never really invested into any other stocks other than his own company but he thought it was interesting how people treated stock of a company like it some sort of bipolar entity which would just stop doing the things that have made it successful upto that point. He was baffled by the fact that most investors don’t think of their stock in a company as owning a piece of that company.
I really appreciated this chapter because it spoke to how we think about investing at Endeavour Wealth Management. When we invest our clients (or our own money) into a stock, we only do so if we would feel comfortable buying the company in its entirety. Contrary to what most investors do, we also prefer to shut off a lot of the noise that is created by analysts and also media. Make no mistake, this doesn’t mean that we are not aware of what the comments are, but it means that we do not allow them to deter us from finding good long-term opportunities in great businesses. So what does this say about analysts and their reports?
Simply put, it generally means that analysts have a different time horizon than we do as investors, which is largely dictated by the marketplace. The media around financial markets highlights short term fluctuations and the stories that created them. Because of this, investors tend to think more short term about their investing and this dominos into analysts and the reports they produce. These analysts are paid to provide an educated decision on what they expect the share price of a company to do over a short-term period of time. In my opinion there are some very bright analysts out there who do some great work, but we often find the information they are providing to be less than valuable to us because we are more concerned about realizing the true value of the businesses we are investing in and that happens over time. WalMart is a great example of this. If you had invested in the company at their originally IPO and bought 100 shares, it would have cost you $1,650 USD. As Sam Walton’s book points out, had you held those same shares until 1990 your investment would have grown to about $3,000,000 but the key is that you had to stick with it.
Sam Walton, who was once one of the wealthiest people in the world and founder of one the greatest businesses, understood that this was how you create true wealth, and thankfully so do we.
-Grant White, CIM, CFP®
Grant White is an award-winning Portfolio Manager/Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Grant White who is a Portfolio Manager for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.