Ben Keller has developed a series of core beliefs about investing in a career spanning 14 years in financial markets:
These observations shape our investment philosophy:
- Sentiment, or 'the collective emotions of market participants' plays a much larger role in prices for stocks than most people think. As such, stock prices can both exceed the fundamental value of a stock by a wide margin and also trade at prices well below what is a realistic value.
- The immense volume of opinion and information that comes out of traditional and new financial media makes it harder for the average investor to make sense of what to do and how to do it with respect to their money.
- Canadian investors have too much of their portfolios invested in the Canadian stock market. The Canadian stock market is heavily weighted toward a few sectors such as banks, insurance companies, and energy/materials.
- Volatility, or the tendency for the stock and bond markets to go through violent swings is a reality that all investors are forced to deal with. Most are unprepared for this repeated scenario, both in how their portfolios are constructed and emotionally.
1. Investment decisions should be approached with a critical eye and it's always prudent to question assumptions. If something is too good to be true, it generally is.
2. The 'value' approach to stock selection is the preferred method for investing. Buying solid companies at a discount to what they are worth provides 'margin of safety' and the optimal opportunity for long-term capital appreciation.
3. Investment selection focuses on the following criteria:
- Strong management
- Companies that earn high rates of return on invested capital and generate strong free cash flow.
- Businesses with barriers to entry for competition.
- Avoidance of what's considered 'trendy'.
4. Portfolios should be diversified globally, avoiding the 'Canadian centric' bias.