[quote=carlsbadworker][quote=Allan from Fallbrook]Most investors, however, cannot read a financial statement. A lot of CEOs cannot read one, either (I’ve worked with more than my fair share of them). [/quote]
I would agree with that completely, but I’m afraid that it may help scaredycat’s argument that any fool with enough luck can be a good investor as wll as a CEO. It is true that luck could explain almost everything in the world, but still I think we piggs analyze the data rigorously because we think it will impact the probability of the luck to our favors. Otherwise, what’s the point of learning anything?
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No disagreement on the luck part. However, I used the phrase “long haul” for a reason. Lucky investors can ride a cycle, or even two, but don’t fare well over the long haul. Long term investors who know their stuff might take a beating over the short term (as Dave points out), but with perseverance will do far better long term. It does take fortitude, especially while watching complete morons celebrate their “winnings” (a certain poster on this site comes to mind).
I’ve spent a lot of time analyzing and investing in specifically targeted small and mid-cap companies and have used Graham’s Theorem (company valuation based on the net value of the balance sheet) extensively. It isn’t foolproof, nor is it the only valuation tool I use.
It has, however, prevented me from investing in Pets.com, Kozmo.com and eToys, as well as quite a few other, larger and supposedly more valuable (from a P/E ratio vantage) companies.
Whether you’re buying a car, refrigerator, or house, do your homework. But you do have to know what you’re looking for and at in order for the homework to have any true value. Sometimes it is better to be lucky than good, but Chance does indeed favor the prepared mind.
