Monitor the growth of profits of listed companies

Coordinator Loic Grasset

Updated

Long-term investing by focusing on listed companies allows you to expect better performance with less volatility. In any case, this is the approach advocated by Youssef Harrabi, co-founder of MasterBourse, a website that allows you to invest in markets.

Paris match. Why is stock selection important in the stock market?
Yousef Harrabi. To achieve above-average productivity by investing in a low-quality company, you need to achieve this efficiency on your own, buying very low and selling at the right time. This requires a certain level of experience, practice, a favorable environment and a little luck. If you invest in large companies, managing your portfolio becomes much easier.

That is?
Preferring quality files and because you don’t pay much in the beginning, you just have to allow yourself to admire the company’s economic performance and then keep your names as long as possible as long as the financial results are there and your investment thesis is out of the question. The stock market price ultimately only follows the evolution of the profits of listed companies.

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What are the benefits of owning such shares?
Their performance in the stock market is less volatile than in the rest of the market, so your advantage is achieved with less price volatility. This is a very significant mental benefit: when the market falls by 20% in a few weeks and you lose only 7% to 9%, you are less tempted to sell. You are less likely to make mistakes related to the psychology of your investor. Financial theory tells us that to make more money in the stock market, you need to take more risks. These values ‚Äč‚Äčindicate the opposite.

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How to determine the best files?
Strong and sustained competitive advantage over time is manifested in the loyalty of the consumer, who continues to buy goods or services, even if there are much cheaper alternatives nearby. In the BtoB markets [entre entreprises], the competitive advantage should be such that the integration of supply into the process of its customers makes it difficult to replace it. Your professional life can also provide you with experience that sometimes exceeds the experience of financial analysts in a particular field. You must use your knowledge! Some hunting grounds are more favorable than others. We value medium-sized companies that have proven the reliability of their business model and successfully internationalized, while remaining more flexible than large groups.

What are the attributes of a nugget in the stock market?
Four criteria need to be considered: competitive advantage, profitability, growth prospects and managerial competence. The first concerns the perceived added value of the products or services provided. You need to ask yourself if the company you want to invest in can raise prices without losing customers, and if so, understand why. Then you have to make sure that this competitive advantage means much higher profitability than competitors. Management’s analysis aims to ensure that the wealth received is distributed fairly and reasonably, without prejudice to the minority shareholder.

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When should you sell your securities?
You can keep them as long as your investment thesis remains valid. It is important to write somewhere why you bought and refer to it. If the situation changes, on a company or macroeconomic scale, you can safely cross the line, regardless of the level of your unrealized growth or loss of capital. Your cost should not affect your decision in any way. This allows you to start on a good basis for new investments.