Trading Stocks vs. Becoming an Owner

As Managing Director and Head of Global Financial Strategies at Credit Suisse, Michael Mauboussin advises clients on valuation and portfolio positioning, capital markets theory, and competitive strategy analysis. He has also authored three books -- Think Twice, The Success Equation, and More Than You Know -- and is an adjunct professor of finance at the Columbia Business School, and chairman of the Board of Trustees at the Santa Fe Institute.

Mauboussin agrees completely with The Motley Fool's approach to investing, viewing it not as a matter of trading different stocks, but as a decision to purchase an interest in a real-world company that has the potential to build value over time.

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A transcript follows the video.

Matt Koppenheffer: Finishing off from a very, very big-picture perspective, skill versus luck, and thinking about investing in terms of investing in stocks -- as pieces of paper, the things that trade back and forth every day -- versus businesses, and evaluating a business, evaluating the fundamentals. Reading all of your work, it seems like there's no competition between the two.

Michael Mauboussin: No competition. You want to clearly be the person who's thinking about a stock as a percentage ownership of a business. You really want to say, "I'm a proprietor to this business. How do I think about it from that point of view?"

That requires you to think carefully about the business itself. It requires you to think carefully about the prospects for that company, the competition for that company, and ultimately the economics of the business.

You get much less focused on the day-to-day movements of the little ticker symbols, and much more focused on, "Is this company building value over time?" with some confidence that that value will be ultimately reflected in the stock.

You get away from the day-to-day noise, focus on the business, and focus on value creation. I think it extends your time horizon, which I think is very healthy, and it gets you to focus on the real right drivers of value.

Koppenheffer: Great. Michael, thank you so much for joining us.

Mauboussin: My pleasure, Matt, thanks.


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