Learning To Invest Money: Why Information Technology Has Revolutionized The Best Investment Strategy
Do you want to know how to consistently get double digit and triple digit returns from stocks? The secret lies in information technology. Yes. Information Technology. And I’ll tell you how.
Most of the stocks I own that have generated more than 50% returns in less than a year are not even on the radar screens of major investment firm analysts. How do I know? Because I have worked for two Fortune 500 financial services companies as a Private Banker and Private Wealth Manager and have never been able to find research on these companies on stocks that appeal to me the most. Why? Because the way of making money investing has changed dramatically and the big investment companies haven’t followed suit. One of the reasons the big investment companies haven’t followed suit is because most have ulterior motives as pure marketing machines. Nearly every manager in every major investment firm is compensated on how much revenue and profit their offices make for the company, not how well their financial consultants perform for their clients. There is a big difference between these two goals. This is the reason former Merrill Lynch star internet analyst Henry Blodgett once stated in comments he never believed would be published, that other Merrill analysts’ stock praised on TV because the top choices were “crap” and “trash” (Source: Fort Worth Star Telegram, 26 May 2002). Even honest financial consultants at large investment firms find it difficult to find a great opportunity among the pool of stocks their company is stalking. Why? Because many companies mandate an older age and a lot of experience as a prerequisite for their stellar analysts. They believe that a chief industry analyst with a few gray hairs is much more credible when appearing in front of their top clients and in front of the American public on television. Personally, if I were to run an investment firm, every one of my analysts would probably be under 30 years old. Why? Well, information technology has revolutionized the ability of analysts to find stocks with spectacular growth prospects before the general public realizes these stocks. Prospects can be found through internet search engines by searching for the right keywords, as well as through other creative methods, including the use of blogs. Often times, the best stock opportunities can be found through non-traditional sources of information, which means it is NOT Reuters, NOT Bloomberg, and NOT one of the other clearing financial information that the big wall street companies pay thousands of dollars to each month. Often times, the best information is free and online, but the key is knowing how to uncover it.
Usually, when you have a problem that you want to solve related to the internet, whether it is a web design problem, a problem with getting better search engine rankings for your website, setting up a blog, being able to understand how to search online databases, and so on, would you turn to a fresh-faced kid or someone with gray hair for help? A child with a fresh face, right? Because usually the younger generation is much more up-to-date on newer technology, including knowing how to manipulate and find data. See where I’m going with all this now? The reason you will never hear about a company that in five years will be the new Microsoft and the new Dells from portfolio managers and financial consultants at large financial services firms is because large financial institutions haven’t realized that understanding how information sources utilize information technology is what has made it possible. the best stock selector to be right many times about stocks that no one else has heard of. And don’t be impressed if your financial consultant recommends a play IPO like skyrocketing Google because the whole world knows about Google. Your financial consultant should uncover dozens and dozens of other Google’s out there that no one else has heard of.
Frankly, I don’t care about the number of times the top portfolio managers of the big investment houses visit the stock companies they recommend. I don’t care if these top portfolio managers have “access” to the CEOs and CFOs of these companies because of their “reputation.” I don’t care about these investment companies’ “global reach” allowing them to research overseas companies. Neither of these impressed me as a client. I could care less because most of the time, the big financial services companies are not researching the right companies.