Moat Investor

35% Return on Stock Portfolio: The Moat Investor Watch List

So I just ran a report of the Moat Investor stock watch list today, and it is up 17.8% since January 3, 2007. That is roughly 35% annualized. I’m pretty happy about that to say the least. At that rate it would only take $27 per month to reach $1m in 20 years time. Better yet, that kind of return would turn a $10,000 investment on January 3 into an $11m portfolio in 20 years. I know what you’re thinking: How do I get my hands on the Moat Investor watch list for free? Read on and you’ll find out.

Turning $10,000 into $11m

Is that sustainable? I’d be crazy to tell you it was, since that kind of return is in the Warren Buffet league, not the stock investor blogger league. Then again, this blog is about studying the habits of Buffet, the ultimate value investor. If you had invested $10,000 with Berkshire Hathaway in 1965, you would now have $30m.

There is only one way to invest if you’re a fan of Warren Buffet, and that is in value. That is what Moat Investor is all about – studying the art of finding great companies, buying their stock below market value, holding them for the long haul but also knowing when to cut bait.

The problem I’ve found is that finding great stocks when you are an amateur is pretty hard to do. I never have enough time to do the research that I want to do. I started this blog as a way to share that research, but it has been slow coming. It’s easy enough to find great companies. As we round out the articles in our investing course, we’ll be talking about how to find great companies. We’ll also share our research with you so you can add to your own watch lists. It’s a little bit harder to determine what the fair value of a stock is. Would you have predicted the incredible growth MasterCard (MA) has seen this year? We did, but only with a lot of research and some experience working in the payments industry. The hardest part of all is to estimate the sustainability of a company’s success – their moat. That is what we’re really looking for here, companies with big moats.

Unfortunately, companies with big moats are often priced at or above their actual value and little money can be made there, at least with some safety. And if a company doesn’t have a moat, you might be buying into a death spiral when the stock plunges far enough to give you a margin of safety.

Still, even though I spend only a few hours each week researching stocks, I’ve been able to find several companies worth investing in for my watch list. It’s worth the time in study because value investing is one of the few keys to building real life-changing wealth. Every investor should think like a Moat Investor. Charlie Munger, Warren Buffet’s partner, says, “All intelligent investing is value investing.”

What’s Behind Moat Investor’s 35%Annualized Return?

Here is a list of the returns since January 3 for the Moat Investor Watch List. I’ve taken out the stock names – you’ll have to subscribe to our free feed to get the watch list for yourself, more on that below.

1. -9.30%
2. 15.50%
3. 74.61%
4. 1.07%
5. -3.85%
6. -0.68%
7. -5.50%
8. 9.09%
9. 10.30%
10. -2.31%
11. -1.70%
12. 11.43%
13. -3.69%
14. 12.30%
15. -1.85%
16. 3.28%
17. 0.85%
18. 21.92%

Total return for six months: 17.8%

You can see that not every stock has gained. But the gains far outpaced the losses because of the margin of safety we’re looking for. Further, you need to get that watch list today because as you can see, there are still some stocks that haven’t hit their gains yet and might represent great opportunities for you.

How should you pick your own watch list?

Pick Great Companies. What are the companies you love? What are the companies that have no other substitutes for the money you spend? Phil Town reminds us that we own companies, not stocks. When you buy “stock,” you’re focus becomes that of a novice or a day-trader. You want to be a business owner of a company that you love with a strong moat. If you were going to buy a company, you would want dependable sales and financial performance. You would want to see a smart, ethical management team. You would want to have a passion and understanding of what they do. It’s no different when you invest.

Understand What the Company is Really Worth. The stock price is only what you pay today. The market is emotional and responds to a lot of data that has nothing to do with a company’s real value. That gives you an opportunity to buy companies at steep discounts. Value is easy to understand when you look at cash flow and return on equity.

Buy When the Market Says Sell. The market is dominated by the big guys – institutional investors, mutual funds, pension funds, etc. They have to be very short term focused because of the pressure to keep up their quarterly returns for fickle 401k consumers who will move their money out in a flash. They can’t afford to be patient. They will leave a company because of one or two missed estimates, regardless of the long-term growth potential the company shows. Patience and a refusal to get wrapped up in the emotions of Wall Street will get you to stocks that are 50% off their fair price or more. I don’t know about you, but I’ll buy a dollar for fifty-cents any chance I get.

Don’t Lose Money. Certainly, when a great company experiences a drop in their stock price, it is time to shift into action. But that action should be heavy reading and research, not purchasing. Only purchase the stock when you are sure that the stock price has dropped because of temporary factors, not because there is a fundamental change in their moat from which they may never recover.

Get The Moat Investor Watch List

I’m always on the lookout for good value companies. I’m not perfect, but I’m also willing to share my mistakes here online with you. I’m constantly looking for great companies who have fallen out of favor of Wall Street that represent great buys. You can read about my methodology here online.

Once I’ve found a great company and determined their fair market value, I keep them on the watch list and wait patiently for an opportunity to buy. Then I have to wait patiently again, as that stock may continue to falter for awhile until the market wakes up to it’s real value. Then, look out. MasterCard is up 77% since January 3.

So, how do you get our watch list? Simply subscribe with Feedburner. The link is also in the right-hand column. It’s free, there is no catch. When you subscribe to the feed, you will see a link for our watch list that is only contained in the feed’s footer, not anywhere else on this site. Of course, I’ll be sprinkling in analysis from the watch list with other analysis here online – just another great reason to subscribe so that you don’t miss an article. Timing is everything in value investing.