Tuesday, February 1, 2011

Why Value?

I figure the first subject to explore is why am I doing this blog and how I came about upon value investing. It took me a somewhat elongated route to get there, though not necessarily a convoluted one, just long. In hindsight the signs were probably there somewhat. I wasn't raised with a background in finance or business or the like. Even in my extended family it's not a reoccurring interest, and this also wasn't a topic that was discussed much, if ever. Nonetheless, as far back as my early teens when I started getting interested in reading newspapers, I was immediately drawn to the business section. Mind you, like any hockey-loving teen, nothing took precedence over the sports section but business quickly became another favorite as I became interested in what companies did, how they made money and how the stock market functioned.

My first stock pick was in my first economics class, in high school, at 15. It was in Biochem Pharma, a medium sized Canadian pharmaceuticals.  Back then I had no concept of investing, reading financial results or what not, I merely picked that company because it had popped up quite a few times in the news, usually with good news. Then I watched the stock price go down more or less continuously as the company was then appearing in the press but with bad news. (Not much later, Biochem Pharma ended up being absorbed into Shire PLC, of the UK).

In spite of this inauspicious start to an investing career, I was not deterred from doing some more research into the investment industry. I graduated from university with a bachelor's degree in business administration. There I first became aware of the securities analyst profession. At the same I did a lot of reading on investing and the stock market. Early on, I found that the Value investing philosophy made the most sense to me. The most logical way of investing is to buy a stock trades beneath its value, not on what it may or may not do next quarter. Furthermore stocks are more than just symbols to play around with like a lottery, they represent ownership in a real business. Therefore the soundest way to approach investing is through the view of a business owner.

I now spend a lot of my free time reading. There's a lot of interesting books on the subject of value investing and its approaches. I also dedicate time to perusing the financial statements of companies that might interest me, both for my own real portfolio, as well as for my electronic portfolio, which will only include businesses after I have researched. You can only better at things by practicing and I intend to accumulate lots of experience. The goal of this blog is therefore to gain experience by chronicling my own reflections on investing, my picks and recommendations, as well as presenting business and investing news that I find particularly interesting. Thus far I have a bit over 2 years experience at investing and I'm looking forward to learning more and refining my style. Professionally, I'd love to get into security analysis or portfolio management as a career as I find it fun to learn about different businesses and I'm currently studying to obtain the CFA designation. I don't expect all my decisions to be home runs and like any good investor I expect to see some losers but this is a thoroughly enjoyable interest and I hope everyone can enjoy and benefit alongside me.