Archive for December, 2008

Principle Investing – Introductory Post

December 25, 2008

“Our method is very simple. We just try to buy businesses with good-to-superb underlying economics run by honest and able people and buy them at sensible prices. That’s all I’m trying to do.”1 – Warren E. Buffett

Since this is the first entry of the blog, I feel compelled to introduce myself and talk a bit about the purpose.

My name is Joaquin Grech Gomendio.2 I was born in Madrid, Spain, the same day that Viking 1 landed on Mars.3 I’m oddly proud of my birth date. During my childhood, I seem to have developed a talent for problem-solving and somehow that drove me to write computer programs at a very early age. In 2003, I graduated from New York University with a double major in Computer Science and Latin American Studies. I had never studied finance.

In 2005, committed to a serious relationship, I realized I needed savings to plan for the future. The financial industry is where the money was; therefore I joined a Wall Street firm to help develop its fixed-income & derivatives software.4 I had always found conversations about finance as appealing as going shoe shopping,5 but I was quickly drawn in by the challenge. I realized that most fixed-income instruments were out of my reach and I started focusing in equities (stocks) during my free time. It wasn’t long before I became infatuated with value investing and began torturing my colleagues with long financial ramblings.

While reading investing material, I found a common pattern among great investors. They all had a set of rules or principles that they adhered to without letting emotions take over. That’s how the title of this blog came to be. In addition; there is nothing better than writing to clarify and organize your thoughts. The purpose of this blog is for me to better exteriorize my passion for finance while trying to keep it entertaining. I’ll try to avoid bombastic or technical language, first and most obviously, because I lack vocabulary and second, because I would bore everyone to death without adding any substance.

One thing that I loved about investing is that it’s simple. Not easy, but simple. Anyone regardless of his or her background can do it. We tend to reward complexity even if it lacks usefulness, but in investing the simplest solution is often the best solution. You just need to remember that you are trying to buy $1 for less, or putting it another way, selling 50 cents for a dollar. It does happen quite often in the stock market.

I am by no means a financial expert. I just enjoy investing and sharing my thoughts. I tend to avoid giving advices at this stage of my financial knowledge but I do always give one:

Avoid learning from your mistakes; learn from other people’s mistakes. Most people don’t learn from history; try not to be one of them. Read Benjamin Graham, Warren Buffett, Philip Fisher, Peter Lynch, Bruce Greenwald, Joel Greenblatt, Jeremy Siegel, Jim Jubak6 and any other known fundamental investor. Read their biographies, find out about their investing partners, and study their investing principles. Study the people that inspired them. There are a lot of great investors alive, even if they can’t be your personal mentor you can interact with them at conferences, meetings or by email.

On a final note, I’m a fundamental investor.7 I believe technical analysis8 (predictions made based on price/volume/charts) is equivalent to predicting a woman’s intelligence by the way she looks: you may be right but you wouldn’t bet your house on it.

And with this…

I declare inaugurated Principle Investing.

1. “A Tribute to Ben Graham” [speech] December 6, 1994 at the New York Society of Financial Analysts.
2. In Spain we inherit one family name from each parent.
3. Viking 1 landed on Mars exactly seven years after Neil Armstrong set foot on the Moon.
4. Wikipedia description: Fixed-income and derivatives.
5. Explanation about the shoe shopping fact.
6. Benjamin Graham, Warren Buffett, Philip Fisher, Peter Lynch, Joel Greenblatt, Jeremy Siegel, Bruce Greenwald and Jim Jubak
7. Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets.
8. Technical analysis is a security analysis technique that claims the ability to forecast the future direction of prices through the study of past market data, primarily price and volume.