The Market Symphony: From Croatian Sunsets to Dow Jones’ Gangs
Chasing the secrets of Wall Street to further demystify the mantra for market success. It's way more than just Lady Luck.
Hello, fellow adventurers and hello new ones!
Did I hear someone ask, “Where in the world is Michael?”
Oh, I’ve just returned from a nice escapade in the sun-kissed lands of Croatia. A break that was as refreshing as diving into crystal-clear waters. This little break had its magic moments.
If you’re new here, a warm welcome from my side! If not, you know what to do.
I’m Michael, your friendly stock guy, and I’m on a mission to make stock evaluation as easy as choosing your favorite ice cream.
Last year, I embarked on a wild journey to create a program that does the heavy lifting when it comes to stocks. Curious? Read the full story here.
Let’s move on.
Alright. What have I done?
Remember the rabbit hole I mentioned?
Well, it swallowed me up once again, and this time, it presented me the book - “The Investment Checklist”. The journey through its pages is far from over, but I must say, it hooked me. There is some good stuff in there.
Here’s a confession.
This detour slowed down my progress with my program – in a good way.
I did, however, accomplish this
While spinning the globe of investments, I landed on the mighty Dow Jones and mapped out its captivating landscape.
I painted a picture of who’s invested where.
(Turn on the volume - it has some misterious music)
When you look at it each investment is connected like a constellation of stars in the night sky.
Every color represents an “investor tribe”, aka institutional investors. Not surprisingly, Blackrock and Vanguard are virtually everywhere - they are the ubiquitous bees of this investment jungle, pollinating every possible flower.
Then - there’s the patient Berkshire Heatherway Bee.
Its mantra?
Only invest in “great companies”.
What’s the secret sauce that makes a company “great”?
Let me let you in on the “secret”.
Imagine a seven-ingredient cocktail for success:
1. A brand name that’s worth its weight in gold (in some industries).
2. Network economy - a charming party host, the more guests arrive, the better the party gets.
3. The power of inertia - it’s all about the comfort or the cost of switching.
4. A product, wrapped and protected in a fortress surrounded by a moat that competitors can’t breach.
5. The navigators at the helm - the management, though we can have a friendly debate about this one.
6. An exclusive patent, though it’s like a fragile shield given the abundance of workarounds.
7. The wild card - cost advantages, though be careful here, as they’re the most fragile.
And great fundamentals and rising stock prices are the delicious aftertaste of all this.
Take Apple, for instance
This tech titan checks off most of these boxes. I won’t delve deeper here, because there are libraries’ worth of resources that dissect how Warren and Charlie invest. But remember, I’m here to answer any questions about these ingredients, just drop them in the comments.
Remember the investment puzzle I mentioned in my last article?
Why do some investors find the pot of gold while others lose their shirts?
Here’s what I’ve found so far.
The unsuccessful ones often have tunnel vision, failing to see the full picture. They’re like tourists guided by an outdated map while the city has transformed around them.
They latch on to analyst reports that are past their expiration dates or rely on tips, gut feelings, or meaningless multiples without asking the hard questions. Others have taken the path of least resistance, settling for ETFs and lower returns.
On the other side of the coin.
The winners of the game seem to fly on a different plane.
They move like a herd. There are leaders and followers.
Using the latest data and understanding that every investment strategy has its season.
When the season changes, they don’t blame the weather but reassess their game plan, akin to what investment gurus like Ray Dalio have done over the years.
And of course, Lady Luck always plays a part.
Behind the Scenes
Progress:
- The prototype saw little action, and that’s okay.
- A big chunk of knowledge was collected from research, making the expedition worthwhile.
- I’ve crafted a colorful map of the Dow Jones network that will be tweaked and enriched along the way.
Plans:
I’ve temporarily hit pause on my rendezvous with Joel Greenblatt’s “magic formula.” Now, as an explorer eager to complete his map, I’m itching to dive back into those enticing waters.
Next up, I have to conquer a new technological peak - deploy my Python code to the mysterious cloud and then seamlessly embed it on my website. It’s like placing a flag on a digital mountaintop!
Where’s my head?
I’ll tell you.
It’s like I’m in a whimsical maze, with fresh paths unfurling before me at each turn.
The number of loose ends has indeed increased, and guess what?
It’s only making the puzzle more intriguing, filling me with more excitement to complete it.
As I scribble down the rough blueprint of my Minimum Viable Product (MVP), I realize the road ahead is longer than expected. Note to self and fellow explorers: When tackling multiple new frontiers, it’s wise to double your time estimates!
Conclusion
Remember. Understanding the investment world is a marathon with pit stops along the way. Sometimes you have to slow down in order to digest.
So, as we prepare to pen the next chapter, keep learning, keep exploring, take a break, and, most importantly, enjoy it.
Until we meet again, au revoir.
Michael
P.S.
Sunsets are magic moments …
Disclaimer:
The information in this article is my personal opinion. It is not consulting, nor does it constitute investment recommendations.
I do my research carefully and follow my personal investment strategy.
The stock market is a complex building with its own rules. They are no rules set in stone, like the rules of physics.
Therefore, use the contents of this newsletter at your own risk. Investing in the stock market can always lead to a total loss of the capital invested.