When I'm out doing speaking engagements, I encourage people to keep in touch with me and shoot their questions over so I can help get them on track with Rule #1. But the thing to remember with investing -- which has a learning curve -- is to actively instruct and not lecture. This is how my mentor did it with me, and it worked. Somehow the work you do yourself has more staying power than something you read off a piece of paper (or web site) from someone else.
This is why I always insist people do their homework and put the companies they want to buy through the YUMMMMY analysis as I've laid it out here on the site (see the Google, Whole Foods and Garmin analyses for detailed examples). Then I have them email me their work so I can give them my opinion.
Some people who write to me don't even know where to start -- what business to analyze. I usually tell them to do this:
Make three circles. Label them Passion, Talent, Money. In the Passion circle put in the things you love to do. In the Talent circle put in the things you are good at doing. In the Money circle put in what kinds of things you've done to make money. Anything that is in all three circles is something you know a lot about. That's half the battle.
Next, go to Yahoo Finance and look up Sectors (Click on "Industries" in the side menu). Find the Sector that has what you know about in it. Inside that Sector are industries.
Find the closest one to your area of expertise. Click on it. It will list all the companies in that industry that you can buy.
Find ONE that you think might be YUMMMMY, then run it through the following list of questions, and send me a brief rundown for each letter:
Y: Why do you want to own this business?
U: Why do you think you understand the business's future?
M: What is the Moat? The monopoly? The numbers? The predictability? The consistency for making a projection?
M: Is the Management on your side or their side?
M: What is the MOS price?
M: What is Mr. Market telling you?
Y: If you owned all of it, what is your 10 yr. yield?
Again, if you need examples of how to put a company through YUMMMMY, take a look at some of my previous posts.
Send me your work, I'll tell you what I think, and then I'll advise you on your next step.
Enough work for today. Now go play!
