Ann: Trading Update, page-79

"I'll put it another way, if the SDI forum had been absolutely quiet in the past 12-24 months, with no posts whatsoever, I seriously doubt it that some of the current newer SDI holders would have known about SDI, let alone decided to buy it."

I am not sure what the basis is for that assertion; other than it's the sheer nature of the innate randomness of information gathering and assimilation.

So, you are right, I sure don't understand the point you are making.

When it comes to investing in publicly-traded securities, the information matrix is infinite, with insights able to be garnered from a vast multitude of sources: publications issued from listed companies themselves, first-hand experience with a product/service, the plethora of media sources, a personal anecdote, a stockbroker report, economic data, a business encounter/seminar/conference/symposium, an advert of the side of a bus, a stock tip from a taxi driver...etc, etc.

If people didn't stumble across SDI on this forum, they might very well have stumbled across it in some other manner; or if it wasn't SDI on this forum, it would surely have another stock they stumbled upon.

But that's the very essence of this kind of stock discussion board resource; it is just one element set out of the infinite array of information sources.

So when you say that people should do their own research, when they come here and read the opinions of others, that's exactly what they are doing: because "doing one's own research", by its very nature, does not preclude the opinions of others.

Quite the contrary, research on company and industry fundamentals, if done properly, would surely involve contemplation of the views of others who might have particular insights and experience that are different to one's own.

Otherwise, why would people come here?

It is certainly the reason I spend time here.

And, I don't mind sayings so, as part of my research process, I have profited meaningfully from having the access to the views of other HotCopper members.

(Of course, not all of the time have the views and opinions of others been 100% accurate, but that's what you get in a less-than-perfect world where not everything can be known.)


You then answered back by saying that these companies were helped by some favourable external factors.
I find these constant need to make a point a little bit unusual of you and perplexing. This is especially so, considering that, in many other threads, you have used the same companies as examples of investment grade companies that you love to invest in because they are consistent surplus capital generators, instead of serial capital consumer.

Yes, I do love to invest in those sorts of companies, but not because they are perfect.

Somewhat unlike you, it seems, I think those "quality" companies we discussed are fallible - and have proven to be so at various points in time.

In fact, I spend a great deal of my time actively looking for their limitations, in order to enhance my understanding of what it is exactly I own. You'll often find me on their threads raising points that are not always flattering.

So all I was doing in my earlier posts was provide my view of why I thought your line of thought of, DON'T BUY MEDIOCRE COMPANIES BECAUSE THEY COULD DISAPPOINT; QUALITY COMPANIES WON'T, was not quite right.

Sure, if SDI and BRG were both trading on P/E multiples of 15x, my incremental investment dollar goes to BRG.
Similarly for SDI at 14x and SDI at 18x.
Ditto, probably, for SDI at 13x and BRG at 20x.

But, buying BRG at 25, instead of SDI at 10x?

In my experience, that's not the sort of formula for wealth creation.

As I said, we owners of the market's wonderful business have been gifted something that we will only see once in our investing lifetimes - namely, a decade-long tsunami of free capital sloshing around the globe.... which has had the effect of driving up valuation multiples by 60%, 80%, and even double what they would otherwise be in normalised monetary policy settings.

Call me a nervous Nelly, but when bond yields keep backing up in coming months/years, those "long duration growth stocks" that have become such market darlings in recent years will see some meaningful de-rating, I fear.

I see some "bitcoin-esque" attitudes in the market's valuation of some of the stocks I own, such as AMC, ARB, AUB, BRG, CSL, DLX, NFH, REH, RHC, RWC, SNL, TCL, WFD, as well as many more than I don't own.

I certainly don't see the same sort of exuberance embedded in the valuation of SDI.


"This is simply my personal observation that most rich people usually have their wealth tied to a single asset, their business.
I will find it very surprising if you don't have the same observation."

While the observation can be readily made, it is causality which is absent.

They became rich because their businesses succeeded, not just because they owned large parts of their businesses.

Owning a large part of their business was a necessary, but not a both necessary and sufficient, condition for their wealth creation.

I understand what you are saying: that you should have large parts of your capital invested in individual stocks.

But what if some of those stocks under-perform?
The resulting value impairment would be meaningful.

I think very, very few people have the level of investment acumen to believe that they won't make investing mistakes.

So, for investors with limited investing abilities - which would be the overwhelming majority of us, myself included - running highly concentrated portfolios is actually a quite dangerous thing to do.