How To Become a Legendary Investor 👑
Free Spreadsheet!
Terry Smith is a legendary investor.
But his investing philosophy is even more legendary, because it's so simple:
1. Buy good companies
2. Don’t overpay
3. Do nothing
Believe it or not, many investors struggle with all 3 of those criteria.
Here's why:
1. Buy good companies
Most investors look at the wrong metrics when determining if a company is high quality.
If you are only looking at things like:
Revenue
Dividend Yield
Price to Earnings
Then you won't be able to locate good companies.
A few methods/metrics to spot quality:
Return on Invested Capital
Free cash flow growth
Debt to Assets ratio
Profit Margins
Capital Allocation
Predictable earnings growth
Competitive advantage
2. Don't Overpay
Beginner investors consider this the most difficult part to learn.
This is where many make the mistake of simply looking at the price to earnings ratio.
(market value price per share / the company’s earnings per share).
But this doesn't come close to painting the full picture.
Good companies deserve higher price to earnings ratios.
The intrinsic value is the net present value of the sum of all future free cash flows (FCF) the company will generate during its existence.
Project how much free cash flow the company will produce in the future, apply a margin of safety, and you will then know what price you should consider buying in at.
(*Note: Want to learn more about Valuation? Watch this video.)
3. Do Nothing
Investors with no experience and investors with 30+ years of experience all struggle with this.
It can take a decade for your investment thesis to play out.
Can you handle buying a quality company at a good valuation, watch it drop 20%, and still not panic sell?
If so, you have the potential to be a great investor.
Following this simple strategy has allowed Terry Smith to build a fund worth over 25 billion!
If you want to see his entire portfolio, I put together an in depth spreadsheet with details on all his holdings. You can access it by clicking here.
Check out these resources:
Tickerdata 🚀 (My automated spreadsheets and instant stock data for Google Sheets!)
Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)
Seeking Alpha 🔥 (My favorite investment research platform!)
Other News…
At the start of every month, I send out a newsletter to my paid newsletter subscribers with a list/spreadsheet of all the dividend stocks that I believe to be currently undervalued.
This sheet was received by over 300 dividend investors last month. (Wow!)
I’ll be sending month’s out in the next few days.
If you’d like to receive this sheet, you can sign up here:
That’s all for now!
See you next week!
Dividendology 🚀