Introducing my new investing Substack

Why I’ve launched a newsletter and how you can use it to “get rich slow”

You might wonder why I decided to publish a weekly newsletter on Substack. In the past I have been asked to produce a weekly column for an eminent investment publication in the UK and refused: for the same reason I didn’t produce a monthly report as a sell-side analyst. I never felt I would have something worthwhile to say every week.

But Substack persuaded me that it would be a good idea and I decided to launch when I had enough material. I don’t want to be under pressure to write something every week – or worse still, on the day.

One reason why I agreed to do it is because writing is an excellent way of refining your thought processes. I used to find that writing research reports forced me to ask myself questions, and I hope this exercise on Substack will similarly improve my thinking. Before I start, readers ought to know something about the way I think – and about my objectives.

In my view, the stock market exists to provide capital for companies to grow by connecting them with savers. But a whole world dedicated to trading and enriching participants in the finance sector has grown up. That extends to bamboozling private investors in order to extract fees from them – the industry seems designed to make things as complex as possible, although admittedly sometimes for legitimate regulatory reasons.

I believe that investing is essentially a simple exercise. Not easy, but not complex. Anyone can do it and be successful. You simply need an investment philosophy which suits you. It’s my ambition to expose as many people as possible to equity investing, as I think it’s fun, enriching (financially and intellectually) and challenging – it helps you grow as a person.

I have a fairly simple investment philosophy:

• Invest in companies I understand, and which will deliver long-term growth.

• Avoid fads.

• Understand the financials.

• Valuation is important, to a point.

Sadly, I am just unable (not clever enough, not stupid enough?) to value many of today’s rocket ships – companies like the payments platform Adyen, which I used as a case study in a valuation course for a $1tn+ asset manager - it was then valued at $100bn (now down to $60+bn ) on sales of $1.26bn. I grew up in a world where 20x was a rich multiple (price/earnings). I have learned to pay up in certain circumstances and, of course, interest rates are low, so I will pay high multiples of today’s earnings provided I can see sufficient growth; but I get scared of daft multiples of revenue. So I won’t be recommending rocket ships.

I am afraid you won’t get rich quick with me. But I hope I will help you to get rich slowly, and that’s my objective.

There are a lot of snake oil salesmen in finance. And then there are lots of doubtless sincere and well-meaning people – often on Twitter ­– who have confused a (usually a tech stock) bull market (turbocharged by Covid) for their own perceived analytical skills.

One newsletter I spotted was $17 a month, for seven ideas per month. If I had one good idea a month, that would be a good result. It’s not impossible to find great newsletters that are good value – Swen Lorenz is a good example. But the writer of that $17-a-month newsletter told me that he didn’t really worry about valuation, he was just looking for companies that would be larger or more relevant in five years. Not a good strategy in my view.

I set great store by intellectual honesty. If investing is about finding stocks for less than their true value, valuation must play a part. I emphasise that this rigour has cost me money in the past few years and that I would be wealthier otherwise.

But you have to be true to your own philosophy, which in my case is to develop a deep understanding of the business. This means also understanding the numbers. But I am not dogmatic. I think macro is important. I think charts are helpful. And I have other stranger ideas.

So if you want to get rich quickly, best subscribe to one of the smarter newsletter writers who is less fearful than me. (Good luck with that while markets fret about the impact of rate rises and quantitative tightening, not to mention inflation.)

I promise to help you to better understand specific companies (more in the paid tier), understand how to research companies more effectively and, I hope, to provoke thought and discussion. 

The paid newsletter is $15 a month, but you won’t get seven ideas! It will never be cheaper. I have specific subscriber number targets in mind and the price will increase when thresholds are met. The letter will be weekly for a year. Thereafter it may become more occasional, depending on how easy and enjoyable it is to write. 

If you sign up for the paid letter, you will get the free letter plus some bonus material – the occasional price sensitive nugget, a spreadsheet or an exclusive chart. I may also at some point (when I hit enough subscriptions) give paying subscribers access to a community where you can ask me questions and post your own ideas, commentary and requests, and collaborate with other subscribers. Let me know if you would find this useful. Paying subscribers will also get coupons for discounts on my courses; if you intend to buy the courses, the paid option is a no-brainer.

Please subscribe either to the free or the paid version – and let me know how I am doing. Feedback is always helpful, and I am on a mission to improve. Tell me what you would like to see in the letter – ideas are welcome.

Thanks and best wishes

Steve Clapham

PS. Stocks I intend to watch (which means I will look at their results and write about those I think are interesting) include the following, but I am open to suggestions. Please email me here or at info@behindthebalancesheet.com.

• Alibaba

• Alphabet

• Amazon

• Apple

• Berkshire

• Carnival

• Caterpillar

• DraftKings

• Facebook

• Ferrari

• Formula One

• Hutchison

• LVMH

• Microsoft

• Nestle

• Netflix

• Newmont

• Rio

• Ryanair

• Tencent

• Tesla

• Zoom