Intelligent Investing
The most undervalued investment in 2017
As the year draws to a close and we eagerly look forward to 2017, I've been asked on several occasions on my outlook for next year and the answer is always "I don't know" or something more intelligent like "My guess is as good as yours." Not to disappoint you further, I do have an investment that you might like to consider. It has minimal downside with huge upside potential. How many baggers? I'm not going to tell you or else you'll stop reading right here because it is too good to be true. It has massive growth potential that doesn't require a lot of capital expenditure to grow it. No complicated story, a back of envelope calculation will tell you how undervalued it is. Calling it the most undervalued investment of 2017 is an understatement. But before I get into it, I'll quickly talk about the role of an investor.
Whatever you decide to call yourself whether as a trader, speculator, value investor, growth investor, fundamental analyst, technical analyst, a hybrid of both and so on it doesn't matter. You are a capital allocator. The role of a capital allocator is to allocate capital in the most efficient way that maximizes long-term return. Simple as that. You and my investment strategy can be night and day but our objective is the same - maximizing our long-term return.
Same goes for companies. A company has to decide whether to initiate share buy-back, issue dividends, reinvest for expansion, M&A etc with the limited capital they have with the objective of maximizing shareholders long-term return. How a company, or you, allocate that capital today will have barely any visible result tomorrow, next week or next month, but like everything that compounds, it will be stark in 5, 10 years.
If we take a step back and apply this in a broader context, it is the same, you are a capital allocator of your life. What is the capital of your life? Your time! How are you going to allocate your time today will have little impact on what happens tomorrow, but like every investment that compounds, your decision today will change the course of your future 5, 10, 30 years from now.
So I present you the most undervalued investment of 2017 - An investment in yourself. I can tell you a stock, a theme that has a high probability of success in 2017 and how much are you going to make? I don't want to shortchange you, or your time. I'll give you something that can scale and compound, and something no one can steal from you, for life. You will be a great capital allocator, if not the best. And what is there a better way to invest in yourself than reading books? Note here I mention reading books not reading forums, news etc. They might be great for knowing the latest, but you want something that really advances you, books is the way. Like every other investment, this investment is simple but not easy. Educating yourself is as simple as telling yourself don't lose money in the stock market, but it is never easy. If you never have the habit of reading books, start small. Just like you won't expect yourself to go running marathon straight away, start from 10 pages a day. Too many? 1 page, 1 paragraph, however small, the power is in starting.
Rather than going for the usual investment books, which you probably know most of them anyway, I would recommend some that sits outside the realm of investing but nonetheless will improve your skills as an investor. Good luck for 2017. May the force be with you. "I am one with the force, the force is with me…I am the one with the force..."
How Not to Die - Michael Greger with Gene Stone
How not to die is a book packed with empirical evidence on what kind of food to eat and avoid if you want to live a long & healthy life. What does this have to do with investing? Plenty. Your body is a system that requires nutritious foods to keep it functioning well. Like all the assets in a company that needs capex to maintain its earning power, if you choose to cut down here and there to save up on food cost, what happens? Yes, you'll boost earnings temporarily before it started failing gradually, and eventually, the cost catches up with you. If you want to have the golden eggs, make sure you take care of the goose. Be wealthy, not rich.
Department of Statistics Malaysia recently released "Statistics on Causes of Death, Malaysia, 2014". Out of the top 10 causes of death, 89% are disease-related death i.e heart disease, cancer, liver disease, stroke etc. If you have a life insurance, you are pretty much insuring yourself against the risk of dying from health related complication (unless your job involves something risky), which is totally preventable. Eat healthily and save up on your insurance, medical cost and family suffering down the road. This is a no-brainer investment.
The Education of a Value Investor - Guy Spier
A personal account on how Spier went from a Wall Street trader to a value investor. Before you dismiss this as another book that promotes value investing (value investors thrive as a minority, not a majority), give me a benefit of the doubt and read it. This is more of a psychological than an investing book. One that will show you how you can shut out all the noise and still do well, even better actually. He hasn't used his Bloomberg terminal for years.
Outsiders - William Thorndike
Well, we talked about capital allocation. This book looks at how 8 CEOs transform their businesses into the best in class through wise decisions and plenty of hard work. If you can get something out of this book, it will the character of these CEOs, how capital allocation can make or break a business, and how to think independently and never go with the flow just because everyone is doing it.
Superforecasting - The Art and Science of Prediction by Philip Tetlock
A must read for every investor. Tetlock examines some of the best minds in predicting and their thinking process. You will learn some of the great tools like think probabilistically, outside view vs inside view, and be a fox, not a hedgehog.
What I Learned Losing a Million Dollars - Jim Paul
I have not had a chance to read this but a book with great reviews. Jim Paul's meteoric rise took him from a small town in Northern Kentucky to governor of the Chicago Mercantile Exchange and proceed to lost it all - his fortune, reputation, and his job. Something worth a read on psychological mistakes that affect all investors.
Economic in One Lesson - Henry Hazlitt
If you enjoy all the big economic news then you'll like this. A simple book that will make you question everything. So next time when the government announces that they going to stimulate the economy by creating jobs, you'll smell BS before everyone does. Wait we just had one, HSR.
Sapiens - A Brief History of Humankind
One of the best book I've read this year. Talks about everything from how sapiens went from hunter-gatherer, agriculture, the industrial revolution and the development of religion, language, currency etc. It will blow your mind. You will question everything you've come to believe is the truth. How does this help? Investing is all about looking at things from a fresh perspective or through many different lenses.
Into Thin Air - Jon Krakauer
A journalist's personal account on an Everest expedition with a group of climbers that turns into one of the worst Mt. Everest disasters in history. If you can learn one thing from this book, it is to see risk in a new light. On how risk can come at you from totally unexpected ways. And risk doesn't come to you when you're right at the top of the mountain, but in every decision, you made before the climb. That applies to investing. Risk doesn't find you after you buy a stock, it's been there all along.
The Compound Effect - Darren Hardy
A motivational self-help book that will inspire you in whatever you do. Your success lies in the things you do when no one is watching, not when everyone recognizes your achievement.
Thinking, Fast and Slow - Daniel Kahneman
Written by a renowned psychologist and winner of Nobel Prize in Economics, Kahneman explores how our mind works and why we are the easiest person to fool. And again, a book that will help you avoid many cognitive biases and improve your decisions and judgments.
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8 people like this. Showing 7 of 7 comments
Thank you for sharing ! Well, just download the Readium app for Google Chrome to read the eBooks.
2017-02-08 14:02
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CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
TheRock2016
Ricky. thanks for sharing. But the files are not downloadable. Right? It's corrupted or damaged.
2016-12-24 14:00