Walter Parker Group Investment Ideas

Walter Parker Group is specifically designed to provide value orientated service

s in the areas of strategic planning, business development, and mergers and acqu
isitions. We assist our clients in building equity by improving the effectivenes
s and efficiencies of their organizations.
Legendary investor Warren Buffett, among others, is notorious for telling invest
ors to buy what they know. Basically, Buffett and his enthusiastic followers sug
gest investing in companies that you really understand or at least know enough a
bout them to be able to explain how they make money - i.e. the company's busines
s model. Though it's certainly not without merit, buying what you know is not ne
cessarily an investment strategy that will yield the most investing success. Her
e we explore some of these limitations and suggest that investors might really b
e better served by buying what they can learn.
Many new investors will find it difficult to delve into the business models or 1
0-k statements of publicly traded companies for some obvious reasons, the most i
mportant being time and/or lack of knowledge. Not many of us can listen consiste
ntly to companies' earnings calls and even if we could, we might not really appr
eciate what is being discussed. Truly understanding a company's balance sheet an
d overall financial direction requires specialized knowledge that most investors
do not immediately possess. There are, however, many online resources that can
help shorten the learning curve on gaining knowledge about a company you own or
have intentions of buying.
A pitfall in just investing in companies that you are comfortable with is the op
portunity cost of not owning companies not as prominent. Most investors know tha
t Exxon Mobil sells gasoline and that Johnson and Johnson make a variety of phar
maceutical and health and beauty products. A valid argument can be made that thi
s companies bring predictability and help mitigate risk in one's portfolio; howe
ver, the fact remains that the biggest gains from stocks typically come from com
panies in the earlier phases of growth instead of the latter phases.
Typically, big well known companies cannot grow at the pace they did when they f
irst became publicly traded. So then the idea is to learn about these companies
before they experience their biggest growth and consequently their most explosiv
e stock price appreciation. Cisco Systems and Microsoft are two of the most reco
gnized technology companies on the planet. Microsoft went public in the '80s. Ba
ck then, not many people really understood "Windows" or "email," which have beco
me essential and necessary in everyone's lives. In the early '90s, who knew what
the internet was, much less that it would eventually be used without wires and
in conjunction with routers? Cisco systems certainly did, and learning conceptua
lly about this company and pulling the trigger would have earned huge returns on
an investment. There are also online sites that help navigate thru some of the
most recent companies and potential high growth stocks. No one should go out and
invest solely into small, growing companies or recent IPOs, but learning about
these companies could make you a more balanced investor.
Another tenet of investing purists is the utmost importance placed on fundamenta
l analysis. Metrics such as forward price-to-earnings ratios, book value, price-
to-earnings growth rates and free cash flow are just a few of the many data poin
ts used to determine if a stock is worth owning. Most of this analysis is based
on assumptions at least one year into the future. Using these metrics, fundament
alists and analysts try to peg a "target" price one year into the future.
Instead of trying to figure out what all this jargon really means, why not look
at a picture of what a company has actually done instead of what it is projected
to do? A stock's chart tells you what it is valued at the moment you pull it up
. Many stock technicians, those who focus on a stock price intensely, would prob
ably agree with the old adage that a picture is truly worth a thousand words. In
vestors should consider using technical analysis for companies they do not "know
" or really have no time or desire to learn either. Doing some homework and lear
ning basic stock charting trends along with terms such as moving averages, break
out and candlesticks can open new doors to stock analysis. (To learn more, check
out our Technical Analysis Tutorial.)
Walter Parker Group Summary
Buying what you know is certainly relevant, practical investing advice. However,
only buying what you know introduces risk to your portfolio: Many of the bigges
t returns will be made from companies you have never heard of and do NOT underst
and. Investors may be wise to invest in companies that they can learn about inst
ead of sticking only with the tried and true of what they supposedly "know."
Exploring alternative approaches such as learning basic technical analysis and f
ollowing recent IPOs will help broaden investors' horizons. by Stephan Abraham
Walter Parker Group is a specialty merger and acquisitions advisory firm providi
ng unmatched expertise to companies seeking guidance in confidential merger and
acquisition transactions, business valuations, financing, asset divestitures, jo
int ventures and equity investments. Our professionals have extensive operationa
l experience, in a variety of industries, in the execution of mergers, acquisiti
ons, joint ventures and transaction advisory to private and publicly held compan
ies.