“Must I buy all the companies recommended in the newsletter?” is a question quite a few Quant Value newsletter subscribers have asked.
The simple answer in NO. You should never invest in anything if you feel uncomfortable doing so, or if it’s a company you do not understand.
Buy all investment ideas
However, if you understand and feel comfortable with the newsletter’s investment strategy and company, you must buy all the recommended investment ideas.
Let me explain why.
We all have our biases
We all have our like or dislike and with investing it is no different. The same as me I am sure you also have industries and companies you like investing in and others you avoid.
For example, I don’t like investing in gold mining companies as I lost money on them when I started investing (more than 30 years ago!).
And I like investing in asset management companies because the business can scale so nicely (as assets increase costs remain relatively unchanged which means profits increase substantially).
The same as these I am sure you have your own preferences.
Biases don’t help you
The thing is these biases don’t help us, in fact, they lower your returns. For irrational reasons, they keep you out of investments that can give you very high returns.
No-one knows the future so excluding some investment ideas because of a personal bias just makes no sense.
Getting back to the newsletter.
The newsletter’s investment model carefully selects investment ideas with a high probability of giving you great returns.
Not all ideas will go up a lot
It is certain that not all the ideas will increase in price. Some will go up a lot, others not much and some will fall.
The problem is
The problem is neither you nor I (or anyone else) know what investments will go up the most and what will fall.
Let me give you a few examples.
Would you have thought that a small Danish jeweller would have given you such a large return after falling 66% due to a profit warning and a huge inventory write-off?
This attractive return came from a boring small UK company that does guarantee repairs for large consumer electronics companies.
William Hill +118.1%
You would have earned more than 100% if you bought this large old mature UK based gambling company when everyone thought the internet was going to kill its business.
Alliant Techsystem +112.6%
You would also have more than doubled your money on this undervalued US defence contractor, at a time when analysts were expecting more defence spending cuts in the USA.
Western Digital +92.5%
Who would have thought that this large computer disk drive manufacturer could have given you such an attractive return?
Roularta Media Group -42.8%
This investment (the worse since the newsletter started in July 2010) lost just over 40% in spite of this Belgium based published already being very undervalued when it was recommended.
Only 2% in any one idea and stop loss system
Because not all the newsletter’s investment ideas will do well (but the investment strategy will), is why we recommend that you don’t invest more than 2% in any one of the ideas. This keeps your losses from any one company low while making sure you are investing using the strategy.
It is also why the newsletter follows a strict trailing stop loss system. This lets you sell losers fast and let winners run.
In summary – your simplest and easiest strategy
Because neither you nor I know the future and our investment preferences (biases) lead us in the wrong direction the simplest and easiest strategy for you to follow is to invest (not more than 2% of your portfolio) in all (or as many of) the companies recommended in the newsletter.
Model gives you the highest returns
A lot of research of quantitative decision-making models that work (such as the one used by the newsletter), have shown that the best results are achieve if you strictly follow the model.
And any filtering you or I do will only lead to lower returns.