Looking for Clues

January 22, 2021

Picking a good company to invest in is a little like choosing the right cheetah. (Take a look back at last week’s post, Choosing a Cheetah, if you haven’t yet.)


Just looking at these two, you can probably guess that Speedy is the better predator.

But what if you couldn’t see the cheetahs?


It gets harder because you can’t see the place they live either:



So you don’t know if they need to be fast to catch gazelle, like Speedy:


Or if they can just open their mouths and one of the hundreds of antelope around with fall in, like Spotty:


So we have to look for clues: sherlock

What can we see? We know how many gazelle they actually caught:


Once again, this makes Speedy look like the slower cheetah, when she is actually the better hunter.

Luckily, you can also see how much all the other animals living around Speedy are eating. When you compare Speedy’s meal with what her neighbors ate for dinner, you can see that not many caught gazelle at all.


This gives you clues. It is likely that there are not many gazelle on Speedy’s savanna or other cheetahs would be able to catch gazelle too. Speedy is the strongest of all the cheetahs on her savanna.

Let’s see how Spotty’s dinner compares with others in her home:


Now Spotty’s dinner doesn’t look very impressive.

If a cheetah is a company, her dinner is the money the business makes. This is why it is important to look, not only at whether your stock went up in price but also what the stock of other companies were doing. These are the clues that will tell you if you have made a strong choice.

The economy is the place where companies live, and it relies on the movement of money. When a lot of people are making money every month, and they feel safe to spend, they do. That spending moves money around. More businesses get that money and then feel that they can spend too.


We’ll look at this more next week.



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