Three Best Buys

Dear Investor,

The sharemarket is a hive of activity - never much more so than the past nine months, which have seen the All Ordinaries Index fall 14% before jumping all the way back up. But successful investing isn't about activity, it's about inactivity. It's about waiting patiently for great opportunities to present themselves - and then waiting patiently for them to deliver their value. The people that can't wait are the ones that offer up the opportunities for those that can.

As Charlie Munger once put it: 'It's waiting that helps you as an investor, and a lot of people just can't stand to wait. If you didn't get the deferred gratification-gene, you've got to work very hard to overcome that.

This is why our Buy list ebbs and flows as opportunities come and go. Before the market stumbled last year it got down to just seven stocks, before swelling to 15 during the downturn. We're now back to nine. This is how it should be.

Pickings might be thin but they have not disappeared altogether. The recent haul has something for everyone.

Income investors might be surprised to learn of the high quality but unloved blue chip paying a yield of 7.1%, while the growth orientated will be attracted to a mining consultancy with a software division transitioning to a software-as-a-service model. As for dyed-in-the-wool value investors, an out-of-favour coal company might fit the bill.

The bigger question is the mindset required to take advantage of these opportunities. Humans are herd animals, which means we tend to feel safest when we're doing the same thing as those around us. In investing, it is this herding behaviour that creates the opportunity for value investors like us.

With the three stocks covered in this report, this demands that you look through the negative media headlines and broker coverage towards the detail of business performance, valuation and likely future growth.

It isn't easy, but to generate a return better than the crowd, you have to do something different from the crowd.

Yours sincerely,

John Addis
Founder, Intelligent Investor InvestSMART

Download the Special Report here