Here's How to Turn Yourself Into a 'Make Money' Investor

I had it backwards my whole career... For most of my time on Wall Street, I was an old-school value investor. That meant I dug through the "bargain bin" looking for stocks that traded at low multiples of earnings, cash flow, or book value. Of course, I cared about the quality and future growth prospects […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] Editor's note: Yesterday, our publishing company, Empire Financial Research, announced that we are integrating operations with our corporate affiliate, Stansberry Research. As many of you know, Stansberry Research is one of the largest, independent publishers of financial research – one known for focusing on delivering high-quality, profitable research to everyday investors for 24 years. As part of this transition, we will cease publication of Empire Financial Daily. But don't worry... We're not going to leave you without your daily dose of market analysis and insights. We expect to complete the transition next week. When that's finished, we'll begin delivering the daily Stansberry Digest to you in place of this publication. Of course, if you don't want to receive the Stansberry Digest, you can opt out [right here](. However, we're certain you'll want to keep it... The Stansberry Digest takes you "inside the room" at Stansberry Research. It's how the company showcases the most important news, ideas, and opportunities in the market. It's where their analysts offer insights and a "sneak peek" at what they're most excited about... and even what they're sharing in their own premium research services. Simply put, the Stansberry Digest is one of the most valuable letters Stansberry publishes. We hope you enjoy it! --------------------------------------------------------------- Here's How to Turn Yourself Into a 'Make Money' Investor By Whitney Tilson --------------------------------------------------------------- ['The End of America? It's Here.']( Porter Stansberry just stepped forward for the first time in more than three years to issue one of the most important warnings of his career. If he's right, the next several years could be a very, very difficult period for investors and everyday Americans. [See why right here](. --------------------------------------------------------------- I had it backwards my whole career... For most of my time on Wall Street, I was an old-school value investor. That meant I dug through the "bargain bin" looking for stocks that traded at low multiples of earnings, cash flow, or book value. Of course, I cared about the quality and future growth prospects of the companies I invested in, but to me, that part was secondary. The problem was that the cheap stocks were usually cheap for a reason... because the underlying businesses were lousy. So the seemingly cheap stocks turned out to be value traps – they just went down and down as the businesses declined. But years ago, I changed – and improved – my approach to investing and how I pick stocks... You see, falling for value traps is just one of the four mistakes that tend to plague classic value investors. The other three are: - Failing to buy high-quality businesses because their stocks don't appear cheap. - Selling great businesses too soon because their stock prices seem "too high." - Failing to understand and appreciate powerful new technologies and trends. I'll confess – despite all of my successes during my more than two decades in the markets, I've made every one of these errors. I want to emphasize, however, that the lesson here is not to just do the opposite and buy the stocks of great growth companies irrespective of valuation. Growth investors frequently make the following mistakes that are, in many ways, the inverse of the ones value investors make: - They overestimate future growth, forgetting the powerful force of reversion to the mean. - They miss the impact of changing technology, new competitors, size acting as an anchor to growth, etc. Trees don't grow to the sky. - They pay too high a price for a stock, such that even if the business performs well, the stock doesn't. - They fall in love with their stocks and fail to sell when they should. - They get sucked into "story stocks" in the hottest, most over-hyped sectors where expectations are way out of line with the fundamentals. --------------------------------------------------------------- Recommended Link: # [Wall Street legend warns: 'A new dawn is coming']( He called the Priceline collapse in 2012, the 2020 crash, and the 2022 bear market. Now he says a new dawn is coming to U.S. stocks. It's time to throw out the investment blueprint of the last decade and prepare for a massive shift. [If you've lost money over the past two years, this changes everything](. --------------------------------------------------------------- The truth is that both quality and price matter... But they're not equally weighted. I estimate that 75% of what determines a stock's performance over time is how the company performs, and only 25% is the valuation at the time of purchase. Unfortunately, for my entire career I had this backwards: I looked among cheap stocks and tried to find good businesses, when I should have looked among good businesses to find reasonably priced stocks. That's why I changed my approach... Today, rather than being a classic value investor, I call myself a "make money" investor – meaning that I try to combine the best of value and growth investing. It's the best way to capture the upside – and avoid the common pitfalls – of both styles of investing. So stop digging in the bargain bin. Instead, look for high-quality companies and wait until you can buy their stocks at a reasonable price. If you are smart, courageous, and patient, you will crush the market. Best regards, Whitney Tilson P.S. When it comes to investing, I'm always interested in what my good friend Porter Stansberry has to say... Over the years, he has put together a string of prescient calls – including when, right before the Great Recession, he warned that the world's largest mortgage brokers were headed toward bankruptcy. Now, Porter has a new bold call out... and if you haven't seen this presentation on what he sees coming, you can't afford to miss it. [Watch it here](. © 2023 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 1125 N. 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