When it comes to investing, two very important factors will improve your level of profit taking.
The first factor is a margin of safety.
That means that you want to buy a company with close to zero chance of experiencing life-threatening financial distress. You also want to get more than you pay for, as that makes it easier to tolerate the often ridiculous short-term behavior of the markets.
The next factor, a very close second, is the idea of skin in the game.
Skin in the game is the ultimate measure of accountability for a company.
It means that when you buy a company, you want the people running it to have a large stake in it – at least a stake large enough to matter when things go well and large enough to hurt if they screw up.
It they don’t have a large stake, it’s as if they have a multimillion-dollar golden parachute. And if business heads south, you’re the one who is going to pay – not them.
So let’s take a deeper look today at how we can avoid losses and drastically improve our profits through this second very important factor, skin in the game…
This week I made a guest appearance on the Money Life Show hosted by Chuck Jaffe.
The show regularly interviews experienced money managers about how they do their job and how they make their buys and sells.
During the interview, I shared my Heatseekers investing methodology, which is something that I call “private equity replication.”
Private equity funds generate the highest returns of any professionally managed asset group year in and year out. So we’re trying to do what KKR and Blackstone do without the incentive fees and with holding periods of about 5 or 6 years.
We also talked about how we’re using a numbers oriented approach to find bargain stocks in this volatile market and what areas of the market are the best investments right now.
I even leaked not one but three exclusive Heatseekers picks while on the air.
The first of these picks is an exciting infrastructure company that could double, even triple, in value with the passing of an infrastructure bill this year.
The second is a bank, which specializes in multi-family lending and has been profitable each and every quarter since 1983 (even during the credit crisis).
And the third is a real estate investment trust, which will not only be a profitable investment but an incredibly safe one because their only tenant is the U.S. government.
Click here to listen to the interview and learn more about these outstanding profit plays…