March 13, 2011 Leave a comment
BECKLEY — I have not been writing as much as normal because I have been working on a side project. I wanted to take a blog post though and share some information about this special project. It is an investment newsletter that takes a lot of the ideas expressed here at American Missive and follows them to an end result – being investment selection. I will continue to write articles here at American Missive as the political, social and economic issues of today weigh heavily on my investment selection process.
A worldview investing approach is a unique approach to investment selection. It is a fundamental top-down investment selection process. In other words, we from a perspective or the world and analyze regions and nations for investment potential, move down to economic sectors and eventually to specific companies and investments.
What is a worldview? It is a way in which one sees the world. A cohesive worldview will have self-supporting principles and values. For example, some major worldviews are Christian, Islamic, Marxist, and humanist. These belief systems about the nature of the world can be your worldview, but, generally, people have non-cohesive worldviews in that they accept only bits and pieces of a belief system they like and may act only on those principles. For example, a humanist may believe that man is capable of saving himself; therefore, the humanist may believe that it is the place of government to intervene in issues of economics in order to better shape human potential. On the other hand, a Christian may take very seriously the view that there are certain natural laws of economics which support a belief in free and open markets which function best with minimal government interference, and that free choice and stewardship of property are rights. Perhaps others blend these views and accept portions of both views. This is not uncommon. Nevertheless, in a worldview investing process it is best to first identify what are your core beliefs about religion, philosophy, ethics, economics, and politics, in order to understand your own worldview.
What we have done at WorldviewInvesting.com is construct investing plans based on two key (potentially more in the future) worldviews. One is based on a Judeo-Christian worldview and the second based on the writings and concepts of secular humanists whose view of the world does not recognize any divine intervention in the development of man.
Once you understand your own beliefs, you can then evaluate regions, nations and their economies , for potential investment, using a PEST analysis. PEST is an acronym for political, economic, social and technological, which are the factors we initially analyze. This is accomplished by asking questions, such as what beliefs influence the politics, economics, social and technological development and policies of a particular nation. These beliefs impact the role of government, business regulation and economic s, all of which are influenced by religion and philosophy, although these underlying bases are often ignored or unrecognized. At WorldviewInvesting.com, we add the additional category of legal to the PEST analysis.
The closer a nation or region is to your worldview, the more attractive the investment opportunities will be to you. For example, from a secular humanist view, nations like the Netherlands or Denmark that have governments that empower their people by grant the rights of health care, a wage, and other government interventions are enabling their people to seek out and build an enlightened society, hopefully culminating in a utopia of sorts one day. Conversely, a Judeo-Christian worldview will see things differently. Because man is ultimately sinful and corruptible, the state will gather that power unto itself and will eventually oppress its people. Accordingly, a person with this view would avoid investment in these nations. These two opposing worldviews can be seen in America’s political, social and economic environment as one side believes in power and control in the hands of the people, and the other side to believes only government can solve our problems and must take control.
With a detailed analysis of the political, economic, social and technological environment, one selects certain regions or nations in which one may invest for the long term. Furthermore, one can also make economic sector selection recommendations based on the overall global economic connection of the world. Investments can be either defensive or aggressive. A global move away from a worldview or against a worldview will call for more defensive investments (basic materials, stores of wealth, and other hard assets) while a move towards a worldview would call for more aggressive recommendations (technology, service and consumer investments). As the world moves away from what one believes to be true it places at risk ones perceived future.
Evaluating regions and sectors for investment potential, the focus turns to individual investments. This evaluation is fundamental in nature, which means that at WorldviewInvesting.com we recommend studying up to 10 years of financial and trend data, if possible, and, if not ,as many years as are available. One should read SEC filings, auditor letters, and notes to the financial statements, analyze management, analyze competitive advantage, and make sure one understands fully the business. Never invest in something you don’t understand. It is important when choosing an investment to choose with as much certainty as possible. At WorldviewInvesting.com we make over 120 calculations to analyze growth, potential, valuations, assets, equity, and free cash flows. We only buy investments with more intrinsic value than the current purchase price of that investment with the potential to deliver annual returns at a minimum of 16%.