Blue Ocean Investing
7 August 2012
Hello! My name is Tanawit and I’m an Investment Advisor for Broadgate Advisory. I graduated from Chulalongkorn University with a Bachelor Degree in Economics (International Program). Today I would like to share with you some ideas about investing.
Investing is an art, not a science. It is a philosophy in prediction and managing expectations. If you want to have great success in investing, it is paramount to have a precise forecast. There is no denying that whoever has the crystal ball will definitely win the market—but not one has that crystal ball.
Instead, most investors normally try to forecast the market performance for less than a year because forecasting the next quarter’s earnings is arguably easier than forecasting the fiscal year. Therefore, most investors prefer to minimize their forecasting period as possible.
Not surprisingly, more than 95% of investors in the market are short-term day traders. Some buy in the morning and sell in the afternoon. These investors solely focus on the short-term market performance.
The problem is that if most of the players in the market prefer to invest for less than one year, the market for short-term investment will be highly competitive like a “Red Ocean”.
Therefore, if you choose to invest and hold stocks for longer than one year, you will see the markets become a “no man’s land” as there is much less competition. This market can be described as a “Blue Ocean” market.
The problem for long-term investment is that as there is less public information, forecasts on certain performances of a market or equity will therefore be less accurate. Moreover, anything is subject to change in the long-term. However, with the relatively light competition atmosphere in this market, there is a higher probability.
In order to forecast a stock’s performance for a long-term period, having the right tools to help select the stock is important. I would personally recommend looking at the industry analysis in which the firm is in and the firms’ sustainable competitiveness; these two are arguably more important than financial statements, which reflect only the short-term performance.
Frequently, a large number of companies that have an excellent long-term aspect tend to fluctuate from bad news in the short-term. Thus, many investors choose to sell them because they focus on short term. They prefer to rotate their limited fund (budget constraint) to invest in other stocks that have received good news in the short-term. Then, a big opportunity always arises for the long-term investor to hedge against the bad news, making “Blue Ocean” a lucrative market as big gains can be made.