Change Your Perspective
My wife and I moved our family from San Jose, CA, to Stockholm, Sweden almost two years ago. Our adventure is equal parts terrifying and awesome. We now see the world from a dramatically different perspective. This affects many aspects of our life and, of course, my investing.
By way of example, shortly after we moved here, I saw products from a niche retailer I had owned some years ago. I didn’t think much about it at the time. Later, we traveled to a relatively remote area of Sweden. Again, I saw their product pop up. Intrigued, I started researching the company again. I knew they considered their distribution platform as a competitive advantage. But I assumed that was pleasant verbiage they adopted in their filings and presentations. It wasn’t until I saw their product in Sweden's far corners that I appreciated what that meant. This experience changed how I looked at the company’s prospects going forward.
Now you don’t need to move 6000 miles to change your perspective - although it doesn’t hurt. There are other ways to adjust your focus. I find it beneficial to do this occasionally to think about your holdings and potential investments in a different context. Here are some not-so-difficult ways to change your perspective:
Switch your investment style:
I lean towards fundamental investing. Sometimes, I switch the view of my companies to a technical perspective. I look through momentum and volume indicators. As well as some basics technical statistics.
Now I am not a technical analyst, it is not my gift, but sometimes it provides interesting insight. It frequently makes me think about other owners of the stock and why they might be doing what they are doing. For me, it usually drives back to some fundamental factors. It has provided some interesting insights over the years.
Look long term:
I fancy myself a long-term investor. Most of my investments involve theses that will take years to play out. I still get caught up in short-term thinking, particularly during market declines or volatility. I like to pull up long-term tables of my companies showing their financial history. I’ll peruse their revenue, earnings, equity, etc. Just get a sense of how they have progressed over the long term. If it’s a newer company, sometimes I look at a competitor or a comparable company to get the same sense. One little mental trick I like to do: I pull up a long-term stock chart. Most sites fill the chart with the stock price (hopefully!) rising from left to right. I have one site I use where I can extend the axis to the future. Seeing the chart with the price in the middle of the screen with a blank future somehow seems to ground me. Will it still be around in 5 years? What will they be doing? It’s a silly trick; I know it. It helps me anyway.
Screen different:
The longer I invest, the less I screen. I have watchlists that are meters long. Nevertheless, I like to run screens from time to time. It’s interesting to see what screens your current (and former) holdings appear on. There are standard, ROIC, Price-to-FCF, and other screens to run. But go crazy a little. Screen for companies that have increased revenue by > 500% in the last five years. Look for companies with negative net margins two years ago that now have positive net margins—screen for the worst balance sheet you can find. You never know what you will turn over. Buffett has famously said, “Start with A” when researching stocks. Anyone who has done this can attest this is a tedious way to research (especially small companies). Crazy screens can help you do something similar, in that you are looking at something you normally wouldn’t consider.
Think like an employee:
I like to imagine myself as a line employee at the company. Working in the factory or sales. What’s it feel like to go to work? Is this an interesting place? Do I like working here and why? This frequently leads you to interesting questions for management—also, LinkedIn and local news stories. The culture of a company is very important for its success. How are you motivated? Is it just money? You might be surprised by what you learn about a company when you think about it through this lens. And it naturally leads to other areas of inquiry: What do customers think? Suppliers? Competitors?
These are just a few ways I found to change my perspective when looking at investments. I find it particularly useful to do this with current holdings. You can start to take your companies for granted, and this type of thinking helps ensure you stay sharp. It is also beneficial for discovering and exploring new ideas.
If anyone has any other wonderful techniques for adjusting your perspective, please let me know in the comments or by message!