Welcome to Stock Spotlight!
We aim to bring you two things.
Detailed research on interesting but overlooked (or at least less prominent) stocks and sectors.
General information on investing and the stock market, from profiles of prominent investors to examination of sector-specific valuation issues to the discussion of basic terms and concepts.
This newsletter isn’t for everyone. If you’re looking for get-rich-quick schemes or exponential gains over the next year, you won’t find them here. You’ll find lots of others who promise them and very few that deliver them!
Our goal is simple: offer great analysis on companies with limited downside and strong potential for medium to long-term returns.
We don’t claim to be able to predict the market. Anyone who says they can do that is being less than honest. We believe that solid analysis based on tested principles can increase your probability of strong investment gains.
You could be the most “book smart” investor in the room. You can discuss investing theory and portfolio management and analyze a hedge fund’s latest moves until the end of time. But at the end of the day, it’s all meaningless unless you can do something with that insight.
That’s why created Stock Spotlight. It’s a chance to explore the thing that matters most in investing: analyzing and valuing companies.
What Stock Spotlight Is All About
This project started out with a focus on detailed company analysis based on the principles of value investing. It has evolved as we explored beyond the conventional definition of value investing.
We all know that “value investing” is “an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic value”.
The challenge lies in defining “intrinsic value”. That definition has traditionally been based on a rather rigid calculation aimed at determining the current value of a company. Since future gains are the whole point of investing and the future is inherently unpredictable, this approach leaves something to be desired.
A company that appears to be “undervalued” based on a financial model may actually be undervalued. It may be discounted due to factors that the model doesn’t consider. If your definition of “intrinsic value” is limited to a formulaic calculation, it may be hard to know which.
As we expanded our definition of “value investing”, we began referring to it as “rational investing”.
What Is Rational Investing?
That really isn’t much different from the broadest definition of “value investing”: after all, Charlie Munger once said that “all intelligent investing is value investing”.
The definition we moved away from was the popular perception of value investing, which seems focused primarily on well-known, established companies that are seen as “value” because they offer little growth potential.
There is nothing in the basic principles of value investing that limits the concept to the boring, established firms that most of us imagine when we think of “value investing”.
Warren Buffett’s criteria look like this
A business that we can understand
A business that has favorable long-term prospects
A business that is operated by honest and competent people
A business that is available at an attractive price
That’s actually a quite liberal definition that could include many companies outside the common perception of value investing.
For example, when we look at that second criterion - favorable long-term prospects - that certainly considers growth as an element of value. Growth and value are in no way incompatible.
We’ve started referring to our philosophy as “rational investing” to differentiate it from that popular perception.
Rational Investing Philosophy
Rational investing, like anything rational, is based on evidence and reasoning. We’re not straying very far from Warren Buffett’s four principles, because they make good sense. We’re not interested in day trading or other speculative short-term trades: trading is not investing.
We’re also not interested in trades based on what is “viral” or “trending”: enthusiasm can move stock prices, but it is transient, unpredictable, and typically not based on tangible evidence or sound reasoning.
We’re looking at industries that are essential and resilient. We’re looking for strong growth and prospects for continued growth well into the future. We’re looking for the companies that dominate those industries and the companies that have the potential to disrupt them. We’re looking to conform those perceptions with empirical evidence and sound reasoning.
One thing we’re not looking for is guarantees. The investment world doesn’t offer them. Rational investing doesn’t guarantee positive results, it just puts the odds in your favor.
Why Subscribe to Stock Spotlight
All subscribers get access to a weekly e-mail with the latest free post. Paid subscribers get exclusive access to new research reports and an extensive library of premium content.
Our research reports are the centerpiece of our content, but we also publish a range of publicly available investment-related articles. Watch for the following:
Reviews of industry-specific valuation metrics and techniques. Example
Discussions of key investment terms and concepts. Example
Reviews of investment-related books. Example
Profiles of prominent investors. Example
We’re not limiting ourselves to that, so if there are topics you’d like to see covered, let us know and we’ll do our best!
Stock Spotlight is a reader-supported publication. To receive new posts and support our work, consider becoming a free or paid subscriber.
Each month we publish a detailed research report, exclusively available to paid subscribers. This is typically an analysis of a single company, but we will at times look at an industry and some investment options within it.
Our focus is global. We will often focus on US companies, as the US is the world’s largest and most accessible market and maintains a high degree of popularity among investors all over the world. We’ll also look at companies in other markets because the world is much larger than just the US.
Click here to see a sample report
We look at four primary sets of criteria when selecting the subjects for these reports.
The traditional valuation process may not be sufficient, but it’s still necessary. Any evaluation of a company begins with an assessment of the basic metrics of financial health and the degree to which the current stock price reflects the company’s fundamentals.
Understanding the industry in which a company operates is a critical part of evaluating any investment. Even a financially healthy company may not be a strong investment prospect if it’s operating in a sunset industry with little or no prospect for growth.
The Competitive Landscape
No company is alone in its market niche. Even if an industry is growing, a given company in that industry will not prosper if it cannot compete. Evaluation of a company’s competitive position is a critical part of assessing its future.
We look for management that is demonstrably honest and competent, and whose interests are aligned with those of the shareholders.
These reports are summaries of our own research and a starting point for your own. They are not intended to be investment recommendations. They’re meant to give you a starting point for further research and some insight into the way we select and evaluate stocks.
We hope to give you an inside look at companies, markets, and industries that you may not have considered, and open up new investing horizons!
Subscribe today to join over 9,000 like-minded investors!
Stock Spotlight is brought to you by the crew behind FinMasters, mainly Jonathan and Steve.
Jonathan Schramm is a self-taught analyst, and investor, with a background in biochemistry and B2B sales. He has continuously followed and written about markets since 2009.
Steve Rogers has been a professional writer and editor for over 30 years, specializing in investment and the impact of political trends on financial markets and personal finances.
Milica Aleksandric has a cross-disciplinary background in web development and business management.
None of the writers or contributors of Stock Spotlight are registered investment advisors, brokers/dealers, securities brokers, or financial planners. The information in our articles is provided for informational and educational purposes only.
The information is not intended to be and does not constitute financial advice or any other advice, is general in nature, and is not specific to you. Before using any article’s information to make an investment decision, you should seek the advice of a qualified and registered securities professional and undertake your own due diligence.
None of the information in our articles is intended as investment advice, as an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement, or sponsorship of any security, company, or fund. The company is not responsible for any investment decision made by you. You are responsible for your own investment research and investment decisions.
Check out our main site, FinMasters.com, for more great finance content.