Motley Fool analyst Jason Moser chats with Rick Engdahl in a side-of-desk interview about developing a personal investment philosophy, and he shares his own four-point system for deciding whether a particular stock is right for his portfolio.
In this video segment, Jason explains his approach to investing, and the four factors he weighs when deciding whether a particular company -- or sector -- is for him.
A full transcript follows the video.
Rick Engdahl: I understand that you have a magic formula that guarantees investing success. Can you just give me a little overview of how you think about investing strategically?
Jason Moser: Yeah, well I'm not going to offer anything up in writing. No guarantees. But I do have a way that I invest, a way that I have formulated the way I like to think about things when I consider investments.
I feel like, for a long time ... my father taught me about investing when I was a kid, and I learned about it growing up. I majored in economics in college, and I have invested for a long time, but I never really had a spotlight to shine on what mattered the most to me.
Actually, my investing philosophy developed from my early days as a Fool. It's four basic points that I try to focus on when I'm considering investing.
First of all, I want to invest in something that is meaningful to me, something that I enjoy, something that I know is going to keep my interest so that I'll want to continue to follow it.
Rick: You're talking about a specific company that you're interested in, or an industry, or both?
Jason: It could be both. It could be an industry, it could be a technology, it could be a sector, it could be a company. It could really be anything, or all of them, but I think that the key is to be interested in it, because if it's something that you don't really care about, if it's something that you're not going to follow or pursue, then I think it's kind of difficult to really feel like you're comfortable putting your money into it.
How do you know really what's going on if you're not following it, right? I think really the key is to find something that matters to you. Everybody has their own lines to draw, so that's a little bit of self-discovery, so to speak. It certainly can change as time goes on as well, but I think that that's something important.
Then from there, the second point is to have a leadership team at that company that you feel cares about that company's success.
I think that one of the advantages today, with the Internet, is that it's given us so much information right at our fingertips. You can find out pretty much anything you want about any of these companies, any of their executives, their history, their past, their compensation -- anything, really.
I think that it's key to have a management team in place that you feel like you can trust is going to do the right things for the business. It's not to say that everybody's perfect. Obviously we know that's not the case, but there are better management teams out there than others. There are better leaders out there than others. And I think it's important to be able to invest alongside a leadership team that you feel comfortable with.
Again, that can be different for everyone, but it's certainly worth looking into to understand, again, what really matters to you when that's concerned.
Then following that, the third point is to find a catalyst. I like to see a catalyst -- either some kind of a short-term event that may be playing out, or a long-term trend that is going to play out for many years to come.
There needs to be a reason why this company is going to stay relevant, is going to matter as an investment. You don't want to invest in something that's just going to sit around there and do nothing. You want to play into some kind of a long-term trend, whether it's e-commerce or whether it's the proliferation of a Starbucks (NASDAQ:SBUX) around every corner, or Chipotle's (NYSE:CMG) magic formula and the burritos that they make, or whatever it may be.
Playing into a long-term trend or some kind of short-term catalyst I think gives you reason to believe there's going to be value created over the course of time as you invest in that company.
Then finally, I just want it at a fair price. I'm not a value investor. I'm not a growth investor. I don't feel like price doesn't matter -- price matters to me very much -- but I also don't let it necessarily dictate whether I will or will not invest in a company.
Price matters, and understanding what the price of the stock is today, what are the assumptions that are leading to that price, is that a price that seems reasonable? Will it offer me an opportunity to recognize some gains in the future? I think that understanding the price does matter, and I'm just looking for a fair price.
To me, that's just how I look at things. Those are the four steps, the boxes that I check as I go along and look at the investments.
Rick: It's a nice, simple guideline. I like that there's four boxes to check, but I think you can unpack each one of those and there's a lot there.
Jason: Yeah. Yeah, you definitely can.