http://profitableinvestingtips.com/profitable-investing-tips/is-your-investment-story-profitable Is Your Investment Story Profitable? Successful investors have a story that drives their investment decisions. A prime example is Warren Buffett who notes that the U.S. stock market prospers on the back of a growing U.S. economy. He looks for companies that reliably generate profits year after year and is a disciple of the intrinsic stock value approach to investing as he was, in fact, a student of Benjamin Graham who discovered that approach. So, the man who is perhaps the most successful investor of all time has a simple story that drives his investing. Is your investment story profitable? Simple Investment Stories The concept of investment stories came to mind after reading an article posted a couple of years ago by Motif. They noted that simple stories drive markets. The article is a good read as they look at investment themes that dominated investing during various periods and how those themes worked out over the longer haul. You know that adage, “stocks are sold, not bought”? What often drives stocks are simple, plausible stories. In fact, Nobel-winning economist Robert Shiller has made the case for how both financial markets and economies are heavily influenced by stories. Investors often call these stories their “investment thesis.” We at Motif like to call them themes, ideas, trends, or motifs. We believe it is far more intuitive for investors to think this way rather than the traditional investment “style boxes” used by mutual funds or risk premium “factors” favored by academics. For example, “small cap value,” which combines academia’s two favorite factors into a mutual fund style box, doesn’t resonate with most investors.

1. By www.ProfitableInvestingTips.com

2. Successful investors have a story
that drives their investment
decisions.

3. A prime example is Warren Buffett
who notes that the U.S. stock
market prospers on the back of a
growing U.S. economy.

4. He looks for companies that
reliably generate profits year after
year and is a disciple of
the intrinsic stock value approach
to investing as he was, in fact, a
student of Benjamin Graham who
discovered that approach.

5. So, the man who is perhaps the
most successful investor of all time
has a simple story that drives his
investing. Is your investment story
profitable?

6. Simple Investment Stories

7. The concept of investment stories
came to mind after reading an
article posted a couple of years ago
by Motif.

8. They noted that simple stories
drive markets.

9. The article is a good read as they
look at investment themes that
dominated investing during various
periods and how those themes
worked out over the longer haul.

10. You know that adage, “stocks are
sold, not bought”?

11. What often drives stocks are
simple, plausible stories.

12. In fact, Nobel-winning economist
Robert Shiller has made the case
for how both financial markets and
economies are heavily influenced
by stories.

13. Investors often call these stories
their “investment thesis.”

14. We at Motif like to call them
themes, ideas, trends, or motifs.

15. We believe it is far more intuitive
for investors to think this way
rather than the traditional
investment “style boxes” used by
mutual funds or risk premium
“factors” favored by academics.

16. For example, “small cap value,”
which combines academia’s two
favorite factors into a mutual fund
style box, doesn’t resonate with
most investors.

17. We ask, is your investment story
profitable?

18. We might also ask if the current
investment story will continue to be
profitable or will collapse like a
house of cards bringing on another
stock market crash, financial crisis,
and financial ruin for many.

19. While the Buffett investment story
is for long term, buy and hold
investors, there are perfectly
profitable investment stories for
the short term.

20. But, they require that you are able
to get in at the right time and get
out while the getting is still good.

21. An example they bring up in the
Motif article is the stimulus to the
market by ultra-low interest rates
in the years following the financial
crisis.

22. For example, the market’s belief in
the power of the Fed’s experiments
with ultra-low interest rates and
quantitative easing (QE) helped
drive the S&P 500 much higher
from 2010 to 2014

23. though those policies may
ultimately prove disastrous in the
long run, as market bears believe.

24. Right now, no one, including the
Fed, knows the long-term impact
of these actions.

25. But much to the chagrin of market
bears, until a bear market disaster
finally hits

26. financial markets can and do move
significantly higher than one may
expect based on pure
fundamentals, such as earnings
growth, cash flows, price-earnings
ratios, credit spreads, and yield
curves.

27. The same to a lesser degree can be
said for the Trump tax stimulus
which put a lot of money in the
hands or corporate America,
allowed for repeated stock
buybacks, and may well have keep
the market up in the last year.

28. A problem with stories is believing
in them after they are no longer
true or believing in a story when
something else is what is driving
the market.

29. This is when investors overstay
their welcome and not only see
their dreams of profits go up in
smoke but watch their investment
capital go the same way as well!

30. Is Your Investment Story
True?

31. There is a lot of hype in the
markets, especially when a
company wants to float an IPO.

32. There are also stories offered by
companies that have fallen on hard
times and are hoping that they can
attract new investors and keep
their stock price from falling too
drastically.

33. We have written that dividend
stocks can be perilous when an
investor just looks at the size of
the dividend and does not do
any fundamental analysis of the
company involved.

34. If a company’s stock falls
precipitously and they do not
change their dividend, investors
may be attracted by a 12% or 15%
dividend which will disappear in a
flash the next quarter as the
company “regroups.”

35. Kraft Heinz Products

36. An investment story that turns out
not to have been as true as we
might have liked is Kraft Heinz.

37. This was considered a “widow and
orphan” stock, solid with a good
dividend.

38. But, these folks have not keep up
with changing food tastes and
preferences of the American
consumer.

39. As such, any attempt at creating a
story about this stock in
preparation for a recovery are met
with skepticism and the suspicious
that this stock is now a value trap.

40. Nevertheless, there may be smart
enough investors out there who
will be able to anticipate when
Kraft Heinz has fallen enough to be
a good buy again.

41. Then the story needs to be the
recovery of a grand old company.
Time will tell on this one.

42. What Will the Boeing Story
Be?

43. We just asked in a recent
article, Why Invest in Boeing?

44. We were pretty positive about this
company as a long term investment
based on their technological
expertise and dominance across
several areas of aerospace
endeavors.

45. But, now there have been two
crashes of the new 737 Max 8 jet
and both China and Indonesia have
ordered these jets to be grounded
until the problem can be figured
out.

46. It is especially worrisome that some
experts are saying that new
automated technology designed to
make these jets safer may have
malfunctioned and caused both
planes to crash shortly after
takeoff.

47. Boeing fell 11% on the news and
could fall more if these events lead
to a general discomfort with Boeing
technology.

48. Investors in Boeing will need to
decide what they investment story
is with the aviation giant and be
ready to change that story as
events unfold!

49. Boeing 787 Dreamliner

50. Constantly Re-evaluating
Your Investment Story

51. If your investment story is the same
as Warren Buffett’s, you have two
tasks to perform.

52. One is to simply keep track of the
growth of the American economy
and the other is to find and analyze
prospective investments.

53. But, if your investment story is the
story of the day such as the growth
of emerging markets

54. the migration industrial production
out of China and into other Asian
economies, or a miraculous
resolution of the Brexit mess, this
will require constant attention and
a good hand at market timing.

55. A good investment story that lets
you sleep at night may be less
profitable but a red hot investment
story that makes great short term
profits may be the stuff of
headaches and ulcers.