Motley Fool analyst Jason Moser chats with Rick Engdahl in a side-of-desk interview about developing a personal investment philosophy, and he shares his own four-point system for deciding whether a particular stock is right for his portfolio.
In this video segment we find out that Jason’s first criterion for an investment is that the company or sector must be of personal interest to him. Do some reading! If you’re going to invest in a company, you need to care about the industry, have a basic understanding of it, and enjoy following its development.
A full transcript follows the video.
Rick Engdahl: Let’s dig into each one of these a little bit and talk about it.
The first one here, enjoying the investment. Does this mean it’s the industry, the company? How has that led you to any investments that you might not have seen otherwise, or how has it maybe deterred you from going in a direction that you might have?
Jason Moser: I don’t know that I necessarily would have cared all that much, for example, for something like a miner or something in relation to mining or industrial activity like that, necessarily. It’s not the sexiest story in the world. It’s not the most exciting company in the world to follow.
What it did make me realize was that I didn’t know a lot about it, and that prompted me to at least want to learn more to see if it was something that I was even interested in at all.
The more I looked into these kinds of miners and these suppliers for miners and things like that, was that there was this huge world out there that was very dependent on a lot of these companies and what they were building in order to help these countries grow their infrastructures and wha-tnot.
Joy Global Inc. (NYSE:JOY) I think is a great example. It’s a company that I own shares of, personally. Joy Global Inc. (NYSE:JOY), the primary product is they make mining equipment for coal mining. There’s a good example of probably one of those lines — maybe people don’t really care for coal all that much, but that’s what you have to figure out on your own.
For me, all of a sudden I realized, looking past just the United States, for example, all of these emerging economies — these non-OECD countries like China and India that are all very dependent on coal for their infrastructure, for building out and progress — I learned more about how Joy Global Inc. (NYSE:JOY) makes their equipment for these different types of miners, and all of the factors that go into determining the supply versus the demand, the pricing of coal, and how that affects Joy Global Inc. (NYSE:JOY)’s business.
I learned a lot about cyclical companies — companies that work in cycles as opposed to maybe a consistent straight line up.
Rick: That’s interesting. When you first started talking about enjoying it, I’m thinking, “OK, what are the companies I enjoy? I like coffee; I’m going to go check out Starbucks Corporation (NASDAQ:SBUX). I like superheroes; I’m going to check out Mattel — or I guess that’s The Walt Disney Company (NYSE:DIS) now.
But you’re saying that you’ve also used this as a way to discover things. You don’t know anything about mining, you don’t feel like it’s an area that you like, but you’re still willing to go there and check it out. Then you might find, “Oh, actually, I am interested in this. This is something that I enjoy.”