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Counterproductive Investor Behaviors and the Importance of Long-Term Thinking
Investors hinder their performance by reacting to market fluctuations with counterproductive behaviors such as selling before a recession, buying just before a bull market, and repositioning portfolios. Compounding over the long term demands counterintuitive and seemingly irrational behavior. Investors should focus on actual business performance instead of stock market movements.
On today’s episode, Clay reviews Thomas Phelps’s book - 100 to 1 in the Stock Market, and also highlights writings put out by Akre Capital Management.
IN THIS EPISODE YOU’LL LEARN:
00:00 - Intro.
02:30 - Common characteristics of companies that increased their share price by 100x.
11:11 - Why most investors aren’t able to hang onto their winners as Phelps suggests.
14:05 - Why good stock selection is much more important than good stock market timing.
31:36 - Mental models Phelps uses to figure out the odds when investing.
42:47 - Why we should invest with companies that align with our own values.
45:29 - When to look for potential 100 Baggers.
47:39 - The four categories of companies that were 100 Baggers in Phelps’s study.
52:53 - Who is best equipped to be individual stock pickers.
56:57 - Chuck Akre’s three-legged stool approach.
60:15 - Takeaways from two of Akre Capital’s brilliant articles - ‘Why Compounding is so Difficult’ and ‘The Art of (Not) Selling’.
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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