“Success in any endeavor requires single-minded attention to detail and total concentration.” – Slick Willie, bank robber
According to Peter Lynch, former head of Fidelity’s Magellan Fund, the main reason for his success was that he only invested in what he knew, and he only knew about it because he had taken the time to learn about it. Lynch suggests that an investor not doing their homework is akin to betting large in a casino before even checking what cards they have been dealt:
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.”
Few investors possess superior knowledge that can regularly be turned into an investing advantage. However, there are things that investors can do to lift them above the competition.
According to Howard Marks, the greater the attention to detail, the greater the likelihood that an investor will be able to gain a knowledge advantage:
“With hard work and skill, we can consistently know more than the next person about individual companies and securities, but that’s much less likely with regards to markets and economies. Thus I suggest people try to ‘know the knowable’.”
Attention to detail is an attribute that separates the best investors from those around them. Commodity guru Jim Roger’s describes how important it is to focus on the detail, to learn everything possible and never leave any stone unturned:
“Leave no questions or nagging feelings of uncertainty uninvestigated. The most common reason why people do not succeed is that their research is faulty or limited to the confines of what is immediately available. Only through meticulous research will you obtain the knowledge necessary for success.”
Roger’s goes onto say that only through “abundant work and diligence” will you be able to develop a distinct advantage over your competitors, and its often the simple, not so interesting things that many investors miss:
“If you just read the annual reports of companies, you will have done more than 98 percent of investors. If you read the notes of the financial statements, you will be ahead of 99.5 percent.”
That’s why the suggestion to read the footnotes of company reports first is so powerful. The really important, interesting stuff is buried deep in the report, most often in the footnotes. Informed investors dig deep, looking for nuggets of insight that other investors can’t or more likely don’t bother to seek out.
This is post number 3 of a series of 7 articles.
Article number 1 – The Catalyst. Article number 2 – Pay attention to what others neglect. Article number 4 – The art of masterly inactive investing: Knowing when to do nothing