Episode 9 - This Is How To Invest In Companies

The Kelly Criterion holds that we should look to buy companies when they are cheap or undervalued, to maximize our geometric returns. But remember the risk hierarchy: investing in individual companies can entail a risk of permanent loss of capital. Instead of looking for the next big thing, when investing in companies we look instead for market mispricing: finding opportunities to buy a dollar for 50 cents. The Lindy Principle tells us that when some companies and brands have been around for a very long time, then we should expect them to remain around for a very long time into the future - a key quality to look out for in potential company investments. We discuss how to find established, profitable, systemic companies, which will throw off powerful dividend or income streams for decades to come. OK, everybody look away now: Steve also tells us why tobacco has been one of the best performing sectors over the decades. We touch on the pros and cons of ethical investing (ESG) from a returns perspective, and how fund managers are now shifting their thinking towards investing in sustainable companies. Some of the key points we covered in this episode include: - What type of companies should you invest in? - How to avoid losing money in individual stocks - Looking for established, systemic companies - Which sectors to look for and which to avoid - The importance of the dividend component of your returns Thanks for listening! Download a free chapter from our book ’ Low Rates, High Returns’ https://www.lowrateshighreturns.com/book Pete Wargent https://www.petewargent.com/ https://www.linkedin.com/in/pete-wargent-37228322/ Stephen Moriarty https://twitter.com/SGM63