Investment Advice

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Investment Advice 

1. Take the Long View

Most people are looking to next quarter.

Instead, says Mecham, look years ahead.

“Focusing on long-term investing (i.e., holding businesses for decades not decimal seconds) leads to a natural decline in the level of importance you place on quarterly results (earnings ‘beats’), short-term headwinds, and temporary compressions in earnings and margins. When you think long-term, all of that really doesn’t matter. More than that, if you keep thinking like this, you’ll start to question why others even ask for quarterly guidance,”

That’s also why…

2. Information Overload is Killing Your Portfolio

In the age of information, less is more.

Most of the information online doesn’t matter to long-term investors, says Mecham.

He wrote:

“The steady surge of information coupled with short-term performance pressures can push rational long-term investing to the brink of extinction. The easy access to information, and the snack-bar nature of consuming it, suggests that disciplining one’s temperament rivals the need for energy and action.”

Focus on key signals, then let those percolate. Your mind works much better when it has more signals and less noise.

This will help you…

3. Prepare Yourself For the Uglies

Great companies can’t avoid the uglies. It’s just part of life.

Mecham says:

“I think there are many instances where a company hits a speed bump and reports ugly ‘numbers,’ yet the long-term earnings power and franchise value remain intact.”

Learn to differentiate between speed bumps and cracks in the foundation.

To do so…

4. Look Beneath the Surface

The numbers can tell you a lot… but they can’t tell you everything.

Other factors, like psychology and brand loyalty, play a huge role in longevity.

Mecham:

“Analysts tend to overweight what can be measured in numerical form, even when the key variable(s) cannot easily be expressed in neat, crisp numbers.”

Similarly…

5. Don’t Sell Your Beauties

Great businesses are hard to find.

And when we do find them, it's hard not to sell after it does gangbusters. But if you have a great company, let it be.

"The best sell discipline is a stingy buy discipline."

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