Separate actionable investment information from all the noise

in Business by

By Michael Osteen

Many retail investors ask what to listen to and what they should ignore when they hear investment-related TV shows, news reports or when reading financial magazines or investment newspapers.

For the retail investor with limited time and resources at their deposal, the ability to filter out non-actionable investment information from the important actionable information is paramount in making investment decisions.

To add to the problem, there are always plenty of different opinions provided by the investment community.

Moreover, many of these opinions conflict with each other although the individuals or organizations are all recognized investment experts.  So it is no wonder why this is such a common question among investors.

The key to solving this dilemma is to first define your investment strategy. By knowing your strategy you have a much better position in knowing what information is relevant and to listen to versus unrelated information that should be ignored altogether.

For example, most people use or either a growth investor or a value investor and as such tend to follow one of those strategies. Typically what is relative to one is not to the other.  Naturally there are those who adhere to other strategies.

Once you have your strategy defined, you should be able to next determine a set of criteria.  The criteria will also help to separate useful information from the mass amount of media noise about investments. It also will help guard you against yourself to avoid making emotional decisions rather than logical business decisions pertaining to stocks.

For example, if you go to Warren Buffett’s Berkshire Hathaway website, www.berkshirehathaway.com/2000ar/acq.html, it lists in detail what their investment/acquisition criteria.

Think of it as simply a filtration system not unlike the very familiar paper filter used in your coffee maker. It just eliminates the unwanted and retains the desired.

With just these two items in place, the life of the average retail investor will be enhanced.

We’d like to offer this example to help illustrate our point.

At Port Wren Capital LLC, our investment strategy is value. And our general criteria are seeking information relative to undervalued companies with the potential of above-average gains over the long-term.

To that end, back in 2010 we noticed that the industrial sector was impacted. We noticed a number of press conferences regarding some recalls of a major automobile manufacturer. Thus, this information was applicable to our investment strategy and our criteria, after which we conducted our own independent security analysis.

We bought shares in the company, and later sold them five years hence with a realized gain of 72 percent.

Armed with both of these filters, you can parse out much of the non-relevant noise from the mass media about stocks.

Keeping these couple of items in mind should help in sorting out the noise and assist you in your investment endeavors.

We hope this information is helpful.  And we welcome your comments and questions.

Michael Osteen is chief investment strategist with Port Wren Capital LLC serving the greater Beaufort County area. Email him at michael@portwrencapital.com. 

Port Wren Capital LLC is a boutique value investment security research company that specializes in uncovering undervalued companies with strong long-term potential for people who want to maximize their investment profits. Visit www.portwrencapital.com.