No End to Facts!
“There’s a world of difference between truth and facts. Facts can obscure the truth.
-Maya Angelou
American Poet, Philosopher & Author
(1928 – )
Today’s post is targeted specially to our Securities Analyst friends. It may however, still have bearing for others among our subscribers…
Definition of Analysis (n.):
* A Detailed examination of the elements or structure of something, typically as a basis for discussion or interpretation.
* The process of separating something into its constituent elements.
Obviously the practice of market, business and securities analysis trades in facts — lots of them!
In fact, there’s no end to facts!
* How much? When? How long? At what price? On what payment terms?
* At what rate of interest are the underlying loans being held?
* What are the core assets actually worth in this market… How about now? No…Now?!
* What are the most significant risks bearing on this category, this region, this particular instrument?
There are reams of data available to us on a variety of channels. Combing through each and every morsel is time consuming and expensive. We do all of this for a simple business reason: to evaluate and decide upon optimum value potential over the long term. Of course, your first task as an Analyst is to break an investment down into its constituent parts – to break through the window dressing and get at the facts!
Right! But what are we to make of all these facts? Well, we’re not sure what to make of all this, without additional judgment, perspective and comment. If you just find and recite the facts, is it possible that you’re reducing your maximum effectiveness? Is it possible that you underestimate the real value that you bring to the process of our decision making? Perhaps your in-person perceptions of nuance, inter-relationships and hidden realities can provide more insight into which investment is the best place for our capital.
Example: A Major League Sports Franchise: Might you discover, that though the investment “looks good on paper;” it is substantially owned by a single family – who just happen to be enduring a nuclear divorce? While things appear rosy and strong on paper, they are anything but, as the core asset is being tossed around like a volleyball and targeted by attorneys from each side. What’s it worth? And is it likely to be a trouble free, sleep-well investment? Or should we instead, FLEE with our money?
There are facts, and there is context. Together they are the basis for a more reasoned decision.
“Well,” you say, “All that’s true. But we invest in much more studious undertakings, less liable to family upset and human foible.”
* Factories.
* High Tech.
* Corporate Debt.
* Sovereign Debt.
Like Foxconn. Hewlett-Packard. Treasuries. European Bonds.
Um. Yeah. Our point exactly.
So it may not be just about raw facts. It’s also about context and insight! We know what the facts are; We just don’t know precisely what they mean. Facts give us a nicely framed picture. But the analyst can (and perhaps should) expand the purview of the evaluation and provide a larger, deeper context and the insight required to make the more nuanced and reasoned decision.
For that we need… you. And your confident assessment of “the facts” – and everything else.
Applications for our Friends on the “Analytical Side” of the Organization:
1. Individually: An Investment Timepiece
The Facts: It’s a great watch. Excellent Timekeeper. Well Constructed. Comfortable in Day-to-Day wear. Compares favorably with the competition. Has a proud history. Retains value. This is the last year of manufacture.
The Context: As the new model arrives; this year’s “collector’s item” will appreciate 15%. Nice to own a watch that appreciates!
2. At home: The Sleepover
The Facts: Barbie Johnson, a senior, is having a sleepover on the 16th to which your daughter in invited. The Johnsons are good people and Barbie is an Honor Student. No alcohol? No boys? The facts in evidence seem convincing – until you call Barbie’s Mom and discover…
The Context: The Johnson parents are vacationing on sleepover week.
3. In the Office: The Securities Analysis
It’s the Facts, the Context and the Presentation.
It’s a game. You want your choices included in the portfolio.
People have a “Descending Scale of Interest:” They pay heavy attention at the outset, then as they feel they’re getting a grip on the material; their texts, emails and lunch desires begin to encroach. So your skills as a “tactical presenter” should influence your decisions about what to feature, how and when to serve it up and how to juxtapose fact, context and gut recommendations. The first thing you tell us should be a lot more important than the last thing – there’s a better chance we’ll hear you.
Of course the facts weigh in a decision – but how heavily – that’s a matter of context and presentation.
Sure we need you to find, evaluate and present the facts, but never forget that the ultimate challenge is to present to reveal the Truth.
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