Friday, February 10, 2006

And Then... (Or My First Steps Part II)

Please see my earlier post “My First Steps” prior to reading this post.

And then…I am cruising my local Border’s like usual, looking for books about investing. I had bought this book


But like I said above I really was not excited about submitting to the mutual fund world.

But I was also not attracted by the books that say things like, “turn a $1 into (insert some large figure here)” or “time the market” & c & c. They sounded either trite or involved complicated day to day systems.

And then…I found this book

And then… as I sat there and flipped through the pages, suddenly I could see, as if a cool breeze came and blew the fog from the field of investing, how simple the answers were. Here was a book that set forth a simple philosophy of investing which I could understand (as far as the formula contained within the book, others can do a much better job than I expounding on its merits or lack thereof).

I had read somewhere that (I believe Mr. Buffet) had commented that in explaining what is generically known as “value investing” he found that people either got it or didn’t. And in that instant I got it (okay maybe it still took a little while but allow me the literary license if you will).

To help understand what I got it is necessary to understand me a bit better. I HATE paying retail or full price for anything. It is quite rare that I will spend more than $50 without doing some quick research to see if I can buy it cheaper somewhere else (I have always found it strange that the majority of people I know or the exact opposite. The less the cost the more they focus trying to save, i.e., will drive around for half hour to get gasoline for $.03 less a gallon, but when they bought the car they are driving they spend no time at all trying to find the best deal).

And then…here was a book explaining very simply that the way to invest was to buy good quality items for a discount. Now clearly I have simplified the thought process and have condensed many hours of thought into a few lines. But my point was Mr. Greenblatt’s book unlocked a thirst for information that I continue to build on as try to determine what companies I will invest in.

What I “got” is an understanding that essentially to be successful in investing you first need to a) identify great companies b) then as best as possible determine what they are truly worth and c) and buy them when they are being sold for less then they are worth. (the means to the end is not important as long as the core principles are retained see tilsonfunds.com/superinvestors.pdf

Why I was so excited was that this is how I have always lived my life. Example:
About two weeks before Christmas 05, the wife says she wants an air hockey table for the garage (I know cool wife that I have). Anyway I research them find out that the size and type I want run about $300 to $500 dollar range, more than I want to spend. About a week before x-mas my local SAM’s Club gets a bunch of table sin of good size for $348 and change, but like I said too much.

Anyway the day before x-mas the wife and I are in Sam’s Club (yes I really like that store and (WMT) too) and they got the table for $298, better but not great. Anyway the day after x-mas back in Sam’s Club (told you I liked it) and BAM!! The sign says $174 and change!!! I look at the wife, she looks and me, and we pull the trigger.

The point of the story is I figured out what I wanted (identified a company) figured out what it was selling for at different places (determined its value) and when I saw it at a price I knew to be a good value I bought it (purchased stock). That’s why I have been so excited, because successful investing only requires me to approach buying companies as I buy everything else (of course that is not to say that I don’t have a lot to learn about the abc’s as listed above).

Now since that time I have continued reading both blogs, commercial websites, books, articles, and anything else that I thought was useful. Of course that has taken a lot of my time and provided the motivation to start this blog, both to help me refine and further my knowledge and hopefully save others like me some time. In the last month I have read this book

and this one

(while I will not endeavor to provide a full book review in time I will provide readers with what I took from the material I have read as it relates to investing). There are a lot of other articles that I have read as well that I will discuss has time goes by.

So that’s about it. I will say that after looking at Mr. Greenblatt’s book, I went on Amazon.com to see the reviews, found a yahoo group listed in one of the first reviews, which led me to this wonderful blog http://www.shaidardashti.com/ which is my selection for my first review.

I could not figure out where to start my reviews so I just decided to start with the first blog I came upon which is Shai Dardashti’s. I do not have a timeline as to when I will finish my review, as I want to provide the best and informed review I can. I also will be sending my review and comments to each person prior to posting to address any comment I may have regarding how I found it to be as a new investor.

More later.

3 comments:

Anonymous said...

Steven,

good post! I just put a hold on that 'the little book' in my library. It looks pretty similar to Rule#1 investing.

keep blogging
Kevin

NO DooDahs said...

You've made a good start on your venture into the blogosphere, Steve. Keep it up!

QUALITY STOCKS UNDER 5 DOLLARS said...

Nice book