Financial Porn

I recently watched a video of a lecture that Tim McElvaine gave at The Ben Graham Centre for Value Investing at the Richard Ivey School of Business in Ontario. Tim now runs his own investment management company and worked for many years with the celebrated value investor Peter Cundill.

There are many lessons in Tim’s talk and it is worth watching. One simple but important point Tim made was the importance of filtering out financial porn. Buffett understood this many years ago when he located back to his home in Omaha in order to get away from people whispering stock ideas in his ear. Now, with the Internet, it takes more than going to a different location to get away from the financial porn that Wall Street spews worth.

Don’t get me wrong. The Internet is a transformational tool for an investor. The problem is the sheer quantity and quality of the information. Blogs, financial forums, RSS feeds, stock recommendations: the information flows like a mighty river. The problem with most of it is that it is an inch deep and a mile wide. No nutritional value.

As I have written before, good ideas cannot be produced according to the dictates of a publishing schedule. Pay close attention to the incentives of those publishing stock ideas. Only rarely do they remotely align with your own.

Big money is made the old fashioned way: by doing deep fundamental analysis that requires time and solitude to read and think. There are no short-cuts. We all need to find ways to filter out financial porn. There is some great stuff out there, but a lot of it – if not most of it – will not help you make money and become a better investor. Make it a point to plan your business/investing day around the things that really matter and then practice the discipline of sticking to your plan.

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4 thoughts on “Financial Porn

  1. Greg Speicher Post author

    Jeffrey,

    Bruce Greenwald’s book Value Investing is very good. Buffettology has some useful models for large cap growth companies.

    The write-ups on ValueInvestorClub.com are very useful in understanding how professional value investors value companies. You can sign-up as a guest and see write-ups on a 45-day delay. Focus on write-ups with high marks – 5.7 or higher – that are in industries you understand.

    Hope that helps.

    Reply
  2. Will C

    Hey Greg,

    Longtime reader, first-time caller haha. Awesome blog. I would certainly say that a reader would not come across much fluff on these pages!

    I would definitely agree with everything you said, with a strong emphasis on the negativity on forums. So much bashing and arguing can arise when a person posts a company whom he/ she deems a suitable candidate. When it’s a company everyone agrees on, you’ll get much praise and thanks. When the company is out of the ordinary, criticism ensues (As Graham said, you are neither right nor wrong because others agree with you).

    And I certainly do not want to come off as saying criticism is bad for business, it does help you learn. However, if you’ve done you due diligence and research and then decide to post your idea, once enough people start saying you’re wrong, it is very easy to freak out and wonder why you even thought such a company could have been undervalued (or overvalued).

    The herd mentality does exist, even if you are on a value investing forum.

    Reply

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