Chapter 17: Look for the catalyst not the company
Professional investors are often quoted as saying, ‘I won’t buy shares in a company unless I understand what it does’. The greatest living investor, Warren Buffet, preaches this view and it makes a great deal of sense. Why would you put your own money, and possibly other people’s money, into something you don’t fully understand?
In reality, though, it is highly unusual for any investor to fully comprehend what a business does and what drives its success. You might understand that a company sells shirts, develops real estate or manufactures ice cream, but that is a quantum leap from grasping the mechanics of the business, why it can be a success and what makes it tick. How else can you explain ...
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