Published on 2023-11-07 in our monthly Quant Value Investment Newsletter. Subscribe to receive it in your inbox the first Tuesday of every month here.

More details about the newsletter can be found in the article “This is how we select ideas for the Quant Value investment newsletter”.

This month, let's explore the benefits of limiting exposure to external noise to enhance focus and boost returns.

Before we delve into that, let's review the portfolio changes.

Modifications in Portfolio

Europe – Offloading Two

No new recommendations have been made this month as the index remains below its 200-day simple moving average.

Stop Loss – Offload

Part ways with Derichebourg SA with a 19.0% loss.

Farewell to Zumtobel Group AG with a 13.6% loss.

North America – Purchase One – Sale of One

One new recommendation this month due to the index being above its 200-day simple moving average.

This recommendation is a US-based manufacturer of advanced concrete placing equipment with $23m net cash, trading at a Price to Earnings ratio of 6.9, Price to Free Cash Flow of 9.2, EV to EBIT of 4.3, EV to Free Cash Flow of 8.0, Price to Book of 2.4, and a dividend yield of 8.9%.

Stop Loss – Offload

Divest from Cross Country Healthcare, Inc. due to a 19% price drop following disappointing results, incurring a 31.0% loss.

Asia – Purchase One – Retention of Two

One new recommendation this month due to the index being above its 200-day simple moving average.

The company is a Japan-based information technology (IT) solutions provider with no debt and cash equal to 41% of market value. It's trading at a Price to Earnings ratio of 9.8, Price to Free Cash Flow of 14.5, EV to EBIT of 4.3, EV to Free Cash Flow of 8.6, Price to Book of 1.4 and pays a 2.0% dividend.

Retain – Two

Continue to hold Doshisha Co., Ltd. at +48.0% and Maezawa Industries, Inc. at +59.3% (both recommended in November 2022) as they continue to satisfy the portfolio’s selection criteria.

Crash Portfolio – Sell Three

No new Crash Portfolio proposals as most markets have rebounded.

Up to now, the 15 Crash Portfolio suggestions, made since August 2022, have gained an average of 20.7%!

Bid farewell to EVS Broadcast Equipment SA at a profit of +33.3% as it no longer meets the portfolio’s selection criteria.

Part ways with Jumbo S.A. at a profit of +100.4% as it no longer meets the portfolio’s selection criteria.

Stop Loss

Divest from Guillemot Corporation S.A. incurring an 11.4% loss.

Shutting Out the Noise – The Detrimental Effect of Business TV on Your Returns

Let's focus on investment apprehensions and how to manage them effectively.

The apprehensions refer to that sinking feeling of opportunity missed during a market surge, and the fear of loss when downtrends and losses emerge.

Succumbing to these sentiments can prompt unsound decisions.

Aiding Your Perspective

One practice that can refine your mindset and an approach I abandoned long ago with no regrets, is to steer clear of market or business TV.

I even ceased reading business news entirely if the headlines were overly sensationalized.

The problem with the current search-driven media landscape is that the headlines have become increasingly sensational.

It's even more pronounced with social media platforms like Twitter or X and Facebook, making it exacerbated!

Media's Biased Agenda

Put yourself in the shoes of media entities – if you rely on clicks or views (as your revenue source – given the declining subscriptions), you are induced to produce sensationalist content.

They deem it necessary to offer interpretations for market occurrences. While they are logical, they may not be accurate.

The simplest and most valid explanation for a market upswing is that there were more buyers than sellers. Why this happened is anyone's guess.

Furthermore, does comprehending this scenario benefit your returns? In my experience, not at all.

The Genuine Issue with Business TV

The fundamental issue with business TV is that it equivocates the stock market's nature as a game.

The predicament arises when you start to partake in that game.

By this, I mean disregarding your well-formulated and researched investment strategy and contemplating engaging in short-term market fluctuations.

Frequent reporting on significant market movements on business TV makes it challenging to resist the temptation.

Enter Overconfidence

When individuals on TV exhibit an air of omniscience about stocks, keep in mind that they are promoting themselves. They cannot afford to admit ignorance.

However, acknowledging “I don't know” is pivotal in investing.

If you start believing that you have the answers to everything, you are likely to make risky decisions. If you convince yourself that you are an authority on every single company, that overconfidence can lead you down a perilous path.

You're aware that presenters excel at giving confident responses even when asked questions such as “What lies ahead for the economy and the stock market?”

It may sound impressive, but the reality is they are no more informed than you are. Extensive research has revealed that the so-called “experts” fare even worse.

Misguided Approach to Investing

However, this is a completely erroneous perspective to adopt when it comes to investing!

The most successful fund managers go to great lengths to purge these intuitions from their decision-making process.

Why?

Because you cannot base your investments on instincts; you are required to have and adhere to a robust investment strategy.

Simply adhering to a robust investment strategy is what enables coveted fund managers to weather market fluctuations and deliver consistent results over time.

The lesson here is to be wary of the noise and sensationalism and be guided by sound principles to make informed investment decisions. Remember, in the world of investing, it's strategic savvy that triumphs.