Many investors seem to have the wrong idea about monitoring stocks. They focus almost exclusively on share prices. Of course, the development of share prices is significant, but the most important thing to a long-term investor is the growth of the company\u2019s capacity to make money.<\/p>\n\n\n\n
In this article, we discuss how the Sifter Fund team monitors the Fund\u2019s 30 long-term equity investments. This is a follow-up to our previous article on what kinds of companies are a good fit for a long-term investor\u2019s portfolio.<\/a><\/p>\n\n\n\t\t You need to do your homework. Before you make an investment decision, you need to conduct a comprehensive analysis of the company. Even when that stage is finished, there is still more homework to be done.<\/p>\n\n\n\n Companies are living organisms. Their earnings model and competitive advantages may suffer. Also, changes in the industry may diminish their capacity to make money.<\/p>\n\n\n\n Regular monitoring is vital.<\/p><\/blockquote>\n\n\n\n So, what are the 5+1 aspects should you focus your attention on?<\/p>\n\n\n\n Before making an investment decision, you should summarize your investment hypotheses. In other words, what are the 1\u20133 things that justify this investment in particular?<\/p>\n\n\n\n For example, in the case of Starbucks,<\/strong> Sifter\u2019s investment hypotheses are based on the growth of same-store sales of existing coffee shops and the growth of the new coffee shops in the Chinese market. In addition to these two key indicators, we keep a close eye on changes in the company\u2019s margins and return on capital, investments, the intensity of competition, and the growth of digital services.<\/p>\n\n\n\n Investment hypotheses are the engine of growth and they underpin our belief that Starbucks, for example, will increase its capacity to make money in the future and the investment will be profitable for the shareholders. This is why we closely monitor to what extent our chosen investment hypotheses are realized.<\/p>\n\n\n\n<\/ul>\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
Instead of share prices, focus on a company\u2019s capacity to make money<\/h2>\n\n\n\n
1. Investment hypotheses<\/h2>\n\n\n\n
2. The earnings model and competitiveness<\/h2>\n\n\n\n