The Fallen Angels
· The Fallen Angels:
a. The common traits of fallen angels are that they had been very popular with investors and traded at overpriced levels at their peaks – they have predictable future revenue streams. Further, there was a high likelihood that all these companies would continue to grow, a key indicator for investors.
b. To be considered as Fallen Angel status, a company must have demonstrated consistent revenue growth for at least the past 5 years. This gives us a comfort level that company management knows what it is doing, and is likely to continue growing revenue in the future.
· Some words about Warren Buffett:
a. In my opinion, no one can actually invest like Warren Buffett – because of his financial size and massive influence he negotiates deals unavailable to the average individual.
b. Many people may not know that the bulk of Warren Buffett’s profits have come not from speculating in the stock market, but from behind-the-scenes operations of companies he has purchased.
c. He may be the world’s greatest investor, but he reached that lofty position by getting personally involved in the companies in which he invests – something few ordinary investors are able to do.
· Markets are anything but efficient, and current prices rarely reflect the actual pro-rata value of a company’s stock. Why? Because professional investors and hedge fund managers are under pressure from their clients every quarter to produce profits within a ridiculously short period of time.
a. They have to cater for a short-sighted public.
b. Studies show that ‘rational participants’ tend to pull large sums from mutual funds after steep market downturns, while adding large sums after market upswings.
· You can have an edge over the large institutions – due to their size, when they buy or sell, it sends a message to the market. Individual has better chance of being nimble and quick than someone investing billions of dollars.
· I’d suggest keeping a mind open to everything and anything that may move markets – learn to read a balance sheet and charts and to understand technical analysis.
· My most important lessons have come from experience.