1. We invest for long term gains.
2. We dislike companies that abuse debts or have a pile of it-they are ticking time bombs.
3. Before investing, we look beyond the veil of the company name-the quantitative and qualitative aspects.
4. In looking beyond the veil of company name, it must also have structural moats necessary to have a competitive advantage.
5. Never lose money
The School of Stocks is established to demystify and bring clarity to the process of stock selection. Our lessons involve a series of short videos explaining various aspects in stock investing that would eventually lead you to an understanding of what makes a company wonderful and how multi-millions and billions of dollars are made from it.
In his book, Alchemy of finance, George Soros points to some interesting distinctions between money and credit. The economy runs on credit. It is net new lending that gives the economy the steam to keep running down the road. Net new lending is derived from the financial economy. With time, the payback of loans by real economy becomes a burden especially when rates spike. Fed rate cuts are designed to reduce this cost whilst creating room for more credit. However, the real economy is full; any extra credit available goes on to inflate the dollar-value of financial asset and increase leverage. The economic shepards have 3 policy instruments to control the direction of things namely the monetary, fiscal and structural policies. For proper use of net new credit, the focus should not be on the monetary policies alone. Fiscal and structural policies need to be adjusted as well . If not, assets will remain the same but more dollar amount will be thrown at it. After all, true wealth is not the amount of money in circulation but the sum of produce of labour, says Adams Smith
A business is an "engine" designed to make money. Some engines are better designed than others. Some are inefficient with high frictional losses; frequent break downs; lack of maintenance whilst others have bad "owners" who run them to the ground. Exceptional businesses are better designed engines that do not share in these fates. They have characteristics that help them use incremental capital to generate very attractive rates of return. No matter how well designed that engine is, it is worthwhile for you as a buyer not to pay the full asking price. This gives you a quantitative margin of safety. Also, it is important to understand a bit about the economy circle. Imagine a situation you bought the right stock and six months down the line, recession hits. You watch as the value of your stock is slashed and diced. How could you have known this was about to happen? It turns out there is actually a "seismograph" for recession- and it is not the popular inverted yield curve. Stay with us to learn what it is and many more.
