Friday, October 28, 2011

No Final Answers Here!

I now receive a ton of requests for my specific valuations and "buy" prices for particular stocks. Because I have declined to divulge such information, I have received many questions as to why I'm not willing to share such info. As such, I thought it best to share my thoughts on the subject with a post.

First of all, I don't want to get into debates with readers about the calculation of various components that form part of a valuation. Everyone will have their own opinion when it comes to valuation, and that's okay, as the purpose of this blog is not to converge on a single opinion but rather to discuss the relevant issues that can have an impact on a valuation. If I had to spend time discussing/debating/describing each of the various inputs that form part of my valuation, I wouldn't have enough time devote to more productive endeavours.

Furthermore, by sharing my valuation numbers, I am also opening the fund up to competition. Many of the stocks discussed on this site are not liquid, but even for the ones that are, I open the fund up to front-running: if readers are buying/selling ahead of me because they know my valuation, I'm doing a disservice to the fund's shareholders, which is not acceptable.

Also, while it would be nice to be right all the time, I am far from it. As such, I have no interest in opening myself up to future scrutiny for the stocks which just don't work out. The fund is intended to be used to judge performance, not individual securities whose returns can be taken out of context and for which someone may hold me liable.

Finally, one of the major themes of this site is that individual investors should learn how to make their own investment decisions, and not just count on the musings of analysts. If I was displaying my own valuations, I would be subtly encouraging readers to take it and run with it. This doesn't make me much different than the analysts we criticize, or the google ads that appear in the top banner of this page, where advertisers offer "hot penny stocks" and other items designed to acquire your e-mail address. While I'm happy to profit off of them by way of reader clicks (and I thank the reader for those, as they form a significant portion of the site's modest income), I don't aspire to become them.

Happy investing!


Anonymous said...

Thanks for this. Would love a post on your thoughts on risk management and position sizing.

Lucas said...

I am glad you posted this. You've said very similar things in previous posts and have always been professional in addressing the issue. Investing is also an intellectual endeavor and to divulge your buy (or sell) points is like giving the answers to an exam; it produces very little in the way of learning. What you do is provide a foundation for investigation. Thank you for that.