Introduction

Hi Reader,

Thought I'd write a quick message to introduce myself and why I am blogging. First, my name is Mike. During the day I am an independent IT consultant specializing in .net development. For the last 6 years, I have been investing inside my corporation as a way of building up a set of assets that I hope will serve me well in my retirement. I think I can sum up my investment philosophy in the following points:

1. I only invest in companies that consistently make money. I prefer that they have had consistent growth in earnings per share over the last 10 years but I will look at companies with relatively flat earnings that pay a great dividend.

2. I only really invest in companies that I understand at least at a basic level. For example, I like the company CNR because at a basic level I understand what they do. They transport item x from point a to point b via railways. Would I be able to run this business, no but I understand the basics of what they do.

3. I like companies that pay a dividend. It's not necessary that it be a big one because sometimes, if the company can get a good return off their retained earnings, it is better to leave the earnings in the company's hands. If the income is flat, better be paying out a dividend, otherwise the return on the retained earnings effectively goes down every year.

4. I don't like alot of debt. I prefer that the company be mostly equity financed. This reduces the fixed costs of interest. Leverage is great at magnifying gains, but it also magnifys losses. The exception would be banks (deposits are a liability after all) or companies that have just made an acquisition (although I'd prefer an acquisition be done with cash).

5. I like predictability. Earnings growth every year for 10 years is a good sign of predictability. ROE being consistent and high (around 15%) is great and makes valuing the company fairly easy.

6. I like a business that is not a fad but a stable business that isn't subject to the whims of fashion or trend. CNR is another great example of this.

7. I believe in buy and hold forever. The only reasons I can see to sell are: the fundamentals changing the valuation or the stock being overbalanced in the portfolio. Having said that, if the market is offering an outrageous price and as a result the predicted returns are lower that 10%, then it might be time to get out until the market leaves it's manic phase.

8. I don't look alot at qualitative analysis like the personalities of management. Probably should but I think the numbers are a more arbitrary view into how the company is run.

Why am I blogging?

Well, over the years I've analyzed companies on my own. I've written an application I use to calculate expected returns on a company at a current price. I based this analysis on a book I read years ago called Buffettology. This book is, in my opinion, one of the best around in terms of teaching you how to analyze the value of an investment.

Anyway, I think it might be of value to me to write down my thoughts on the companies I am seriously thinking of investing in. Or for that matter, when I revisit companies I already own to see if somethings changed, or if there was a flaw in my decision to by.

So, that's why I'm here. I think I am going to start by adding the companies I already own and analyzing why I hold them (and possibly finding some I shouldn't).

You might be able to tell, this blog is more for my own consumption but if you find value or want to comment, please feel free. Discussion on these topics is always interesting!

Mike