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Rule #1 - Do not lose money! Rule #2 - Never forget rule number 1! ( by: Warren Buffet )For comments or questions please email: : admin@equityresearch.com |
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Equity ResearchAre you one of those people that has always wanted to be a great investor? You are smart and talented, but the big returns elude you. You're smart enough to get it done, but then you can't devote your life to equity research.That's why we exist. We take the confusion out of the market by providing very few select picks that will beat the market. We take the value investor approach that it is easier and more reliable to make a few good decisions than to try and make thousands of them. If you know a stock will double in three months, why do you need to diversify in stuff that will have a lower return. You don't because diversification is really the acceptance of not knowing what you are doing. Would a wise farmer throw in a few weed seeds for diversification? In our opinion, if you don't know what you are doing you should keep your money in cash and wait until you have a keen understanding. How Can We Beat Harvard M.B.A.s with Equity Research Teams?Competitive Advantage Due to Mathematical ProbabilitiesThere are a lot of reasons. Mathematically it is much harder to grow a billion dollars than a million dollars. This math concept, alone, allows a small investor competitive advantage in the market. It means that if the information were equal the small investor can truly win out. Investors only need to make a few good decisions to make a lot of money.New BloodMany of the funds cycle new MBA graduates in and out of the funds. In other words, the fund managers have high turnover and many times are new. An experienced professional can pretty easily beat a new guy out of school even if they are from Harvard. As an example, look at the Fidelity Investment funds and you will find many newly graduated students at the helm of major funds.Evidence You Can Beat the MarketJoel Greenblatt beat the market for over 10 years with a consistent 50% fund return on the Gotham Fund. The fund is now closed.Seth Klarman has an annualized return of over 30% with a long track record. His fund, the Baupost Group, is now closed to new investors. Warren Buffet talking about the mathematical problems of managing large amounts of money, “If I only had a million dollars to invest, I can guarantee you that I would be able to get at least a 50% return per year”. Peter Lynch beat the market with his Fidelity Magellan fund. The gigantic fund would get returns of over 30%. This may mean that Peter Lynch is the best investor out there because he did so well with so much money. The thing to keep in mind is that Peter Lynch, in his books, talks about consistently finding 10 baggers (stocks that will multiply by 10 times in a short amount of time). Peter could find these companies, but with a large fund, he couldn't buy into them. The market capitalization of these companies was just too small. While it is amazing he could get 30% returns, he is effectively saying he could get 10 times that return if he were managing a smaller amount of money. Equity Market RatiosThere are ratios to give you an idea of how a stock is performing relative to its peers. Some of these are the pe ratio, peg ratio, roc ratio, debt to equity ratio, alpha, and beta. They all give you an idea of what to invest in. In general, stick to basic mathematics. Higher level statistical computer models have historically been a dangerous way to invest.One of the most important thing to look at is the accounting. You can find this in the 10K or annual report. The most important aspect of accounting is the balance sheet. The balance sheet can help you see an overall perspective better. There are many ways to manipulate earnings and debt. The balance sheet tends helps to give you a better overall picture. Faulty AccountingWith Enron, people are now aware that accountants can do some pretty shady things. These accounting shenanigans have been going on for ages. The equity analyst must look for accounting fraud. Some firms hire forensic accountants to help them analyze companies books.Analysts and Equity ResearchersOn our site, we point out not to trust analysts. Does that mean you don't need an analyst? The answer is no. You do need good analysis.What we are pointing out is that most analysts are like lobbyists. They get paid to have an agenda and to tell people in investor talk why to buy a certain company. They are always way overly optimistic and lag the market so badly that the recommendations never help you. Built into nearly any recommendation is the desire to sell a product or induce a certain behavior. It may appear that they care about you, but it isn't the case. In the United States, there are a few firms with superior research information. For example, Goldman Sachs and Morgan Stanley have great information. Good researchers are not guided or bought out by companies to hype things. The problem is that they typically will not give anyone the information. The reason is that the more people that have the information the less valuable it makes it. It is impossible for anyone to make money if everyone has the exact same picks to go off of. The information is typically released to a handful of top clients or even to fund managers. The goal of any investor should be to get in with some real equity analysts that aren't trying to sell you. One of the reason that mutual funds are so popular is that it takes the pressure off the investor. You can sit back, relax, drink margaritas and the money will come rolling in. Does anything ever work that way? Imagine you are a “fat cat”. You have superior information and are making millions. You don't want to release any of your information and keep it strictly private. Then, you realize million of people want to emulate you. Instead of giving out your superior information, you put the masses into mutual funds. You get to charge a lot of fees for your knowledge and you never have to divulge your secrets. In fact, you can hire a new guy from Harvard to manage the fund and never tell them what you know. Now, you are truly in fat cat city. About Equity Researcher : Why We ExistThis site exists to fill the gap. We intensely research investment opportunities and only participate in those that are the very best. We take the time to crunch the numbers. We take the time to figure out which company we will want to own for the long term. We look at the ratios, accounting, management, cost structure, and also show you how to buy effectively.In other words, we fill a desperate need in the market. Average Americans that want to be great investors and then providing them with great information. Is there a charge for the service? There is no charge for our picks or our advice. We are a new site and may charge a fee in the future. At this point, we are enjoying our time researching equities and just putting it out there. This is our first draft and the site will definitely be improved. We have not added charting, stock research, stock quotes, and all the other information found at online brokerage trading firms because the firms that provide the information charge around $1,200.00 per month for the information. It would cost a site like us the same as if we were Yahoo or Microsoft. If you would like to donate, please do so. If you feel you would like to contribute to our research or help us in any way, please send us an email. We expect that, over time, we will build an investment network and eventually close it to new people. Why close it? We want to have something good for people that can be managed well. If you are reading this, we are still signing people up. |
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