Thursday, June 16, 2016

US stock market note 2

Invest on the company, not the stock.

So here we've come to a stage where all the statistics and technical facts explain nothing about how much trust should we endorse a company. There are highs and lows of a company, and even the best company has a life cycle. Nobody think Google or Apple or Amazon will be there forever, and for most people, the question why these companies are on the top of the pyramid of the value chain, has never pass their minds. 

'Why the fuck does that matter, Daniel ? They are there because they are Google, Amazon, and Apple. That's it.' 

That is a typical thought of most investor. They simply held a belief that these brand names themselves are the magic that make the stock price rise. They check the statistics, and do the analysis, and read some news, and say, 'Ok, I think the market shows we should buy/ sell/ hold.' , as if they are talking about the weather. Yes, they are, incredulously, treating a huge company of billions in market value, thousands of workers, and millions of customers, as a natural phenomena. They measure what is thought to be indicators- humidity, wind speed- using their cutting-edge technology - radar diagram - to forecast the weather in the stock market in the following 3 days. That's how ridiculous some professional traders that handles billions USD perceive stocks. They know nothing about how to run a company.

Enough ranting. The secret of withholding trust and belief in a good company, as if they are yours, is to observe how good are their employees. For tech companies whose product is the intellectual ideas, smart and skilled workers/managers are the very key to the destiny of the company. Only the best workers guarantee the success, others are secondary. Employees are the genes of a innovative companies. The best innovation is not how mush research budget they lay on the nest annual year, or how many research papers/ patents they published every year, but how they are able to innovate themselves. This always takes the best people to succeed, for they are not slackers in thinking, and practicing it. This gene is the seed of fire of a innovative company. However, a genuinely innovative company should be able to generate great technologies that challenge the state of the art.

There are some side indicators that 'might' be useful to infer if a company has the best employ, such as the salary, the welfare, and the most exciting atmosphere that you can find and evaluate objectively on Glassdoor or other job hunting websites. Many companies claims they possess them, but how do we get a more concrete measure of employee quality, which is a combinatory measure of skill, creativity, passion, teamwork, and entrepreneurship? Difficult, isn't it ?

I henceforth put down my final rule of employee investment: how much the company invests and trusts its employee determines the resistibility and perseverance when the company faces negativities from the market forecasters. Good companies always empowers their employees.

Forecasters can earn money because they controls the media, and controls the capitals, so they can sway the stock price in a short time. While here we are talking about the operation of a company, and how companies innovate and renovate itself continuously to avoid being outrun by the environment. We are talking about the mechanism that modulates the weather.

The difference between us, and them is analogous to the difference between geoscientists and weather forecasters. We are talking about the climate, while they are talking about weather. No matter how weather changes, climate prevails in the long run. If global warming is true, then we will see tropical habitat becomes inhabitable, while Antarctic regions start to thrive eventually. This rule of investment is superior to the weather forecast investment, since we buy in very early in very low price, years before weather forecasters start noticing the trend on their radar technologies, and making waves for them.

As for when to sell ?  I would say never, or any time. You can sell it any time since your return of investment is around 10 to 100 times. You can keep it as long as the trend persists, those who goes with the trend will keep rampage the market, just like a hurricane on the tropical pacific ocean. 

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