The Wall Street waters are frigid and the skies are grey. Yet Warren Buffett said last week that it’s time to buy U. S. equities. He repeated his simple rule: “Be fearful when others are greedy, and be greedy when others are fearful.”
Buffet’s advice isn’t only good for investing; it’s good for scouting.
In The Whale Hunting Process™ we advise company leaders to build a whale chart–that is, a list of specific companies that you want to hunt. After thoroughly researching those companies, your scouts watch them, tracking specific signs of readiness to buy. [See Chapter 4, Whale Hunting]
It’s time to revisit and revise your whale chart. Just as investors are looking for deals–the opportunity to buy a good stock at a bargain price–you should be looking for whales that will emerge from a down market as big winners. They are investing in products and services; they are expanding their market position; they are acquiring other companies, opening new markets, and in general capitalizing on others’ misfortune. These are the whales that you want to be hunting.
How should you approach the whale chart revision?
- Revisit your target filter. Are all of your categories still relevant? Do you need to add one or more new categories about how the whales behave in a diving market?
- Run your target filter through your market or markets again. If you locate new or different companies, have the scout create new dossiers on these companies.
- Brainstorm with your team the kinds of companies that are likely to do well in a tough economy. Debt counselors, career counselors, bankruptcy attorneys, and third-party debt collectors, for example. Colleges, universities, and trade schools catering to the working adult. Companies that sell efficiencies-cooperative buying, spend management, systems outsourcing. Companies that sell essential commodities. Companies that manage prisons, transport prisoners, or provide security. Do you have products and services for companies like these? If not, what are the companies in your verticals that you think will best take advantage of the market downturn?
- Determine the whale signs you will watch for. These may include analysts’ ratings, guru recommendations (such as what Warren Buffet is buying), published stories, press releases, and company-sponsored investor teleconferences or webinars.
- Arm your scout with one or two investor newsletters–especially letters specific to your industry verticals. See what whales the investment advisors are recommending. Watch for signs of their growth-related activity
I like Cabot Wealth Advisory as a free daily newsletter. Check out their blog at The Iconoclast Investor. The company also offers ten paid-subscription investment newsletters.
Watching stock prices plummet and listening to scare-tactic talk show hosts will not tell you a thing. Actively searching your waters for those companies who are quietly getting stronger as others weaken will be good investment of a scout’s time.
As Buffett also says, “If you wait for the robins, spring will be over.” Likewise, if you wait to see the whales breaching, they will be north of you.