The secret of wealth creation is intimately understanding what you’re buying. That way you appreciate the true value and tend not to over pay. And provided you exercise patience, the rewards always come – a concept that works whether you’re investing in yourself (up-skilling), your home or part-ownership of a company.
We sometimes ignore this when investing in shares of listed companies. Professional money managers believe everything has a price, and if the discount is deep enough even a bad business run by incompetent people will deliver a return. For me, life is too short to throw good money behind bad causes. Much better to buy what you know and love.
Which is what we did two years ago when buying Amazon.com shares for the Biznews Global Share portfolio. It’s a great company run by a genius with a business model that benefits customers and has the ability to disrupt many sectors. Pundits said Amazon shares were “expensive” when we bought them. But the price has more than doubled and it won’t be stopping there.
In a South African context I have the same view about Discovery and Investec. Both companies make a point of only appointing super-smart and service driven staff (phone their call centres), are competing successfully in the sophisticated UK market, and are blessed with brilliant leadership. Mr Market falls in and out of love with both stocks. You shouldn’t.
