Sometimes the profound truths are the easiest to understand.
This is particularly true when it comes to investing. Many investors make the process much more difficult than it needs to be. At its core, investing is a simple process governed by a few irrefutable axioms.
Choosing investments based on what you already know is one of these simple yet profound truths. I first heard this rule articulated by Peter Lynch, the superstar manager of Fidelity’s Magellan Fund. Lynch wrote one of the best books on the stock market, “One Up On Wall Street,” in which he stresses this simple investing rule.
Leading commodity trader Jim Rogers also repeats this mantra whenever he is asked what to invest in. I learned this several years ago when I interviewed Rogers while he was running on a treadmill — an interviewing first for me — in his home gym. When I asked if he cared to share any investing tips, he replied, “Look around you — what do you see?”
I saw racks of dumbbells and a pitcher of orange juice, among many other things. I must have had a perplexed look on my face because he said, “Invest in items you use every day, because if you use them, it is very likely everyone else does.”
I was hoping for specific tips to pass along, so I was disappointed he wasn’t willing to share any insider-type information — but after further consideration, his suggestion struck me as profound. I remembered it was the same advice Lynch offered in his best-selling book.
Since then, I have integrated this idea into my investment choices. Recently, I took an extreme look at the concept. Drilling down, I asked myself: What single item do I and nearly everyone else on the planet use on a daily basis?
My first and obvious answers were air and water. Aside from a few niche hedge fund making a market in water rights and the water company utilities, there wasn’t much exciting news there. No one has figured out how to commoditize the air we breathe, so that option hit the skids, too.
Finally, I thought of toilet paper as being the single item used by most everyone on a daily basis. Everyone from the wealthiest people in the world to the most downtrodden use this product at least once per day. The average person uses 20,805 sheets of toilet paper a year, according to online retailer ToiletPaperWorld.com.
My next step was to locate stocks in this industry. One company stood out above the rest as a top performer with plenty of upside. That company is Orchids Paper Products Company (NYSEMKT:TIS).
|Â© 2013 Orchids Paper Products|
|Orchids Paper markets directly to consumers under a variety of names, such as Colortex bathroom tissue.|
Founded in 1976, Orchids Paper Products Company (NYSEMKT:TIS)’s product line consists of bathroom tissue, paper towels and paper napkins. The company markets directly to consumers under a variety of names through assorted types of stores. It also sells “parent rolls” wholesale to firms that label and market under their own brand names.