The Discipline of the Two-minute Monologue: Peter Lynch, a great value investor, expected his staff to be able to be as disciplined as he was, and be able to expound the merits of a company in a ‘two-minute monologue’. The salient facts about any company should be extracted from the morass of information, then the decision could be taken.
It was vitally important that the essence of a company could be understood and explained concisely. Thus the details of the strength of the economic franchise, management quality, financial structure and low price need to be boiled down to the key deciding factors.
If more than two minutes is needed then this is an indication that the investment is too complicated and carried too much uncertainty to be considered further.
Don’t think the two minute rule lets you off the hook – the briefer you have to be the more expert you need to be, so you’ll have to really understand the business to explain it accurately and concisely. That requires quite a lot of hard graft. That brings onto another Lynch principle, know the facts.
Know The Facts
Among the criteria Lynch sets out for investing, first and foremost is understanding the chosen companies, and continued monitoring of them.
A buy-and-forget policy is asking for trouble; constant attention is required for pursuing a profitable strategy.
By learning enough about shares held, the mistake of selling too early can be avoided. It can be very tempting to sell when the value of shares has doubled or trebled, but if the company is strong and in a competitive position, and the management is of high quality, there is every possibility that it could be a 10- or even a 20-bagger.
To retain a portfolio’s profitability take sufficient time, at least every few weeks, to maintain a high standard of knowledge about each company and check on its progress.…To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
Prof. Glen Arnold
I'm a full-time investor running my portfolio from peaceful Leicestershire countryside. I also happen to be UK´s best selling investment book author and a Financial Times Best selling author.
Originally, I wrote all my ideas out in full on this website. Now that ADVFN publish them they are entitled to display the full version for six months – you can see them here. Thus can I only post the first few paragraphs here for anything younger than six months.
I write 2 to 3 newsletters per week - investing is about making the right decisions, not many decisions.