[Initial Insight] Fake Stock Study by Gaemi

"The stock study that ants do is fake."

I felt a pang inside at the words of CEO C of V Asset Management, well known as a value investor. The routine of fake stock study he describes is as follows. Even today, diligent ant investors wake up in the morning and carefully check major news happening around the world. They read news containing experts' forecasts on whether the U.S. Federal Reserve (Fed) will end the rate hike cycle with a "baby step" (a 0.25% point increase in the benchmark interest rate), and also check trade balance and unemployment rate figures. They keep up with countless macroeconomic variables every day. They also meticulously look for whether CEOs of global companies and political leaders said anything strange overnight.

But when it comes to deciding which companies to invest in, they readily reach out to popular stocks or growth industries recommended by others. Then, hoping for a rise, they repeat the routine mentioned above while weighing the timing to sell. They can recite the names of hawkish and dovish Fed members by heart, but they don’t know well the names of the CEOs and key executives of the companies they invested in, nor the business structure. This is what CEO C calls fake stock study. It’s something that people mistake for studying but doesn’t really help the investment results.

CEO C’s process of selecting investment companies is similar to a user conducting a job interview. Financial statements are like resumes. It is common to observe a company for months or even years before making an investment decision. During that process, they search for all publicly available information about the company as if conducting a background check on someone, tracking it for a long time. Listed companies release report cards (quarterly reports) every three months, which are thoroughly analyzed. If there are questions, they call the IR officer to ask why certain decisions were made or why numbers suddenly increased, or visit the company directly to inquire.

Buying a company's stock means owning a part of that company. When you buy stock, you are entrusting your money to the company’s CEO. Therefore, you need to consider whether the company’s CEO or owner is trustworthy and whether this business will grow your money. In a way, the decision investors ultimately have to make is simple: which company to buy, when, and at what price. Of course, it is very important to know and prepare for changes in the macroeconomy and geopolitical risks. But even more important is what kind of company you are investing in.

Of course, there is no absolute answer in investing. But the "fake study by ants" mentioned by CEO C is certainly something that ordinary investors should deeply reflect on when investing in stocks. Ant investors who entered the market after the COVID-19 pandemic are now in their fourth year of stock investment. More fundamentally important than the Fed members’ remarks or the economic impact of the Russia-Ukraine war is the exact reality and competitiveness of the companies I invested in. Research and analysis of the business model, growth potential, management, fair value, and risks of the company you want to invest in are essential. You should check whether people will still visit your favorite restaurant (company) even if another restaurant opens nearby, what the raw material prices are like, whether the restaurant owner does not waste the money earned, and whether the staff are well managed.

Ant investors have likely learned painful investment lessons through experiencing both bull and bear markets over the past four years. However, as the stock market shows an upward trend, the cooled investment sentiment is heating up again. Theme stocks are thriving, and "debt investment" is increasing. Unless you want to end your investment life with a "one-shot" mentality, analysis and diversification are essential. Ants, let’s start real stock study.

This content was produced with the assistance of AI translation services.