Geoff Gannon December 16, 2017

Why I Spend 95% of My Time Thinking About New Stocks

I’ve done a couple posts recently that have too many “rules” type statements in them. As investors: it’s less important what we tell ourselves we’re doing and more important what we’re actually – habitually – doing.

So, how do I spend my day?

If I told you I spend 95% of my time thinking about new stock ideas and 5% of my time thinking about the stocks I already own – I’d be exaggerating how much time I spend thinking about the stocks I already own.

I’m on a constant quest to find new stocks. That might not be obvious judging by how rarely I buy something new. But, that’s how I spend my days. I’m always looking to buy something new.

I don’t really think about what I own. And I don’t really think about “selling right”.

I just think about “buying right”.

Which really consists of:

1)      Picking the right business to be in

2)      Paying the right price

Using NACCO as an example, I decided early on in my research on that spin-off that the coal business was the business I wanted to be in and the small appliance business was the business I didn’t want to be in. It then became a question of the price I was willing to pay.

In very rough terms, I’d decided that I wanted to pay less than $40 a share for the coal business. When I first looked at the price after the spin-off, the coal business was selling for about $32.50. So, I bought it.

The truth is: I’m not really going to re-visit NACCO at all – except sometimes to write a little about it – till the end of 2018.

Someone asked me recently if writing about stocks made me a better investor or a worse investor. I’ll answer that question on the first Q&A episode of my new podcast (reminder: read this post, and send us a question if you get a chance).

It certainly makes me a different investor. The investor part of me spent all my time thinking about NACCO before buying it. The writer has spent all his time thinking about NACCO after buying it.

If I wasn’t writing about the stock, I would’ve bought it in October 2017 and then only checked in again with it around December 2018.

I’ve always thought my attention is best spent focused 100% on finding new ideas. And I know from past experience that thinking a lot about what you own is as likely to hurt your returns as to help those returns.

I know that a lot of attention and effort spent on a stock in the research phase generates better returns. I’m not sure that extra attention and effort spent on a stock you already own generates better returns.

For some people, I think it leads to worse returns.