Behavioural tips for a new year

I am not keen on headlines that are too flashy, so I hope you fail to become excited by this post’s title.

Courtesy of MrContrarian on Twitter (https://twitter.com/MrContrarian), there is an interesting link to the latest blog post by Bronte Capital (https://goo.gl/S95R1T).

I thought I would share some of my own ideas for becoming a better investor in 2017. It’s more of a “what not to do” kind of list:

  • If Stockopedia gives a company a rating of 10 or less – it is coloured red – it means it is univestable. Don’t be like Nasrudin the Mullah, chomping away at the chilis trying to find the sweet one
  • If you bought a stock and it drops by 10% in a day, then it probably means you are wrong, and you should probably sell.
  • Income stocks: avoid stocks with high debts, regardless of how many years the dividend has gone up. Do not assume that just because a company is in the Footsie, it therefore makes it safe. Companies with pitiful returns on capital are unlikely to make long-term holds. Conventional wisdom is that there is safety in a dividend being “well-covered”. In my view, this is bad advice. Dividends are safe when a company has moderate debt and reasonable returns on capital.
  • Avoid companies that have never made a profit

Anything else I should add?

Lastly, there a couple of stocks that have entered into my stream-of-consciousness recently that I thought I would like to mention.

NANO (Nanoco) is into “research, development and manufacturing of heavy-metal free quantum dots and semiconductor nanoparticles for use in display, lighting, solar energy and bio-imaging.” I got caught up in the hype of all that a few years ago. I am pleased to say that I have since come to my senses. I see that it is still languishing far below the price I bailed out at. NANO has some big “tells” that people are wasting their time and money investing in this stock:

  • it never made a profit
  • its StockRank is 2
  • the ADVFN bulletin boards have dozens upon dozens of posts per day: a big contrarian indicator for tiddly companies. There is technical detail and analyses of competitive advantage in abundance. In my view, none of this helps, and is more likely to land you in trouble.

KOOV (Koovs). It is “a supplier of branded fashion garments and accessories for sale by a third party through Koovs.com Website principally in Republic of India”. Predictably enough, I saw it in connection with the current interest in retailers, be they online or now. I think someone was asking if KOOV was a better bet than BOO. No! Just no! It is based in India, which puts me off for a start. KOOV has a stock rank of 9. Too low! And unlike BOO, it has never made a profit.

I own none of the stocks mentioned in this post.

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About mcturra2000

Computer programmer living in Scotland.
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