The book 100 to 1 In tThe Stock Market by Thomas W Phelps is perhaps one of the best books ever written on long term value investing.
I just re-read this book and was once again reminded about the importance of thorough research, financial analysis, and a the need to take patient, disciplined approach to investing. I think this is a good time to list my top 10 lessons from this awesome book:
- When it comes to this type of investing, the challenge lies not in discovering stocks that can grow by 100 times or more, but in the ability to retain and hold onto them over time.
- Our need for quick and immediate investing wins is undermining our prospects for long-term success.
- The most important metric in value investing is earnings growth. As long as a company’s earnings are growing the stock will grow.
- There is such a thing as the “right buy” which is basically buying at deep discount. However, in order to nail the “right buy” you will need to have the courage and conviction to buy when no one else wants to.
- You will have drawdowns. Sometimes it can take a long time for the rest of the market to see the value that you saw. These are the periods when it won’t look good.
- There is actually a negative correlation between activity and results when it comes to investing. So the less you try to “manage” a position the better the results will be.
- If you are looking to make 100x on your investments, your biggest risk is selling too soon.
- You will make better investment decisions if you are investing with money that you can afford to lose.
- As far as choosing which company to invest in, you will increase your odds of success by focusing on companies that have a unique competitive advantage.
- Finally, To make money in stocks, you must have (1) the vision to see them, (2) the courage to buy them, and (3) the patience to hold them. Patience is the rarest of the three.