ValuFocus Investing: A Cash-Loving Contrarian Way to Invest in Stocks

Chapter 2

A Better Way to Invest in Stocks

It's all about predicting the future. But we all know that's impossible.

Still, brilliant minds—thousands of them—have been working for over a century at perfecting the stock-investing process.

What could possibly be left to learn?

Optimizing returns is all about picking stocks that go up in price. Plus, many of these companies also pay a dividend. The sought-after result for stock investors is growing total shareholder return.

Understanding the need is simple. It is to figure out how a company will do in the future.

Doing that accurately is the challenge. The reality is that it can't be done perfectly. But it can be done better for most investors.

Investors know that present stock prices reflect the market's effort to predict a company's performance. That $30 per share price is what investors believe the stock is worth today. That $30 price is based on the company's revenues, profits, and available cash flow to remain viable while continuing to invest in profitable growth going forward.

Bottom line: Successful stock picking is measured by how well a person can predict the future—both how well the company will do and continue to do, and what the stock market believes will be the company's future performance.

Everyone tries to make good predictions and will continue to try.

We believe we have figured out a better way. We really have, and the purpose of this book is to lay it out for you.

Put the Focus in the Right Place: On a Company's ...