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Invest in quality businesses, not stock symbols

FOR MOST PEOPLE, investing in a stock is little more than watching the trail left by the stock symbol as its price wanders along some drunken path. They know that the symbol is associated with a company while not being too sure what is expected of this company to ensure that its share price will rise. It is a case of let’s sit back and hope for the best. F
Then there are others who deliberately do not want to know anything about the activities of the company. They want to study the “pure” movement of the stock price with the belief that they can use this information to make forecasts about the future movements of the price. Warren Buffett refers to this as trying to play bridge without looking at the cards.
It just makes no sense to ignore the fact that the stock symbol is attached to a company. And it makes no sense not to apply sound business principles to analyze these companies. The more we know about the company, then the more confident we can be about the price of the stock. Not on a day to day basis, but over time.
“When I buy a stock,” Warren Buffett said, “I think of it in terms of buying a whole company, just as if I were buying a store down the street.” If you were buying a store you would want to know all about it. What were its products? How consistent are the sales? Do they keep trying new products or do their products stay fairly constant? What competitors does the store have and what distinguishes it from them? What would be the most worrying thing about owning such a store?
This leads to the idea of looking for companies that have a strong and durable economic moat. Just as castles have moats to protect them from invaders, so companies can have economic moats to protect them from challenges of competitors and changes in consumer preferences. The moat can be made up of attributes such as brand name, geographical position or patents and licences.
All these principles about purchasing businesses are equally applicable to purchasing shares. It becomes one of the most enjoyable parts of investing to look into the “business” aspects of any company that you are considering adding to your portfolio.
Implementation using Conscious Investor
There are three key ways that we help people with Conscious Investor to implement Buffett’s method of thinking in terms of “buying the whole company”. For a start we provide a Watch List of quality companies in Australia and North America with analyses of their businesses and check lists of their features including their economic moats. Secondly, we also have a Members’ Forum where people discuss the attributes of different companies. Thirdly, we provide regular twelve page analyses of key companies in Australia and North America.
Conscious Investor also provides the ability to scan thousands of companies to locate those with superior financial characteristics as described by Warren Buffett.