{"id":4140,"date":"2020-12-11T10:57:38","date_gmt":"2020-12-11T09:57:38","guid":{"rendered":"https:\/\/neu.hqam.ch\/quiz-what-type-of-investor-are-you\/"},"modified":"2023-06-11T17:38:26","modified_gmt":"2023-06-11T15:38:26","slug":"quiz-what-type-of-investor-are-you","status":"publish","type":"post","link":"https:\/\/hqam.ch\/en\/quiz-what-type-of-investor-are-you\/","title":{"rendered":"Quiz: What Type of Investor are You?"},"content":{"rendered":"\t\t
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A strategy is an investor\u2019s best friend<\/strong><\/p>\n

Is it hard to be successful at investing? Well, that depends. Is it hard for a cooking newbie to succeed at French pastry with the first attempt? Even if there is a recipe, something most probably will go wrong if one has no idea how to determine if this amount of \u201clayers\u201d and \u201ccreaminess\u201d is layered and creamy enough. However, every newly made batch adds to skills and experience. The same applies to investing and while there is a multitude of factors that can influence one\u2019s success or failure, a strategy is an absolutely indispensable prerequisite for this process to be cognitive decision-making rather than a pure game of luck. And while over time the strategy most certainly can change to cater to a shift in goals, the framework it creates will keep you disciplined and accountable. The logical question then emerges: how can one determine what strategy suits him\/her the best and where should one start? Ideally, everyone strives to acquire a top-quality asset at the best price possible, let it be a bottle of wine, a box of chocolate, or a share of a publicly listed company. With the former two, quality can be easily determined by the smell and taste, while with stocks this very often is reflected in growth story and fundamentals. Therefore, to find out what kind of inclinations you have as an investor, let us take a quick and easy blind test. <\/p>\n

Put your senses to the test<\/strong><\/p>\n

Consider three companies \u2013 X, Y and Z. Company \u201cX\u201d is a Consumer Discretionary, company \u201cY\u201d is a Technology stock under Software category and company \u201cZ\u201d is Healthcare, classified as Pharmaceuticals. The first impression is usually brought by \u201csmell\u201d, or in the case of a business, by its growth profile, both in terms of turnover and earnings. <\/p>\n

Fig 1: Revenue growth (YoY), actual and estimated <\/em><\/p>\n

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Source: H\u00e9rens Quality Asset Management, Thomson Reuters<\/em><\/p>\n

It becomes quite apparent that Company X is way ahead of the other two when it comes to revenue growth, both historical and projected. Company Y in comparison looks rather bleak, despite double-digit growth numbers, while the profile of Company Z is a mixed bag. A similar picture can be observed in the development of earnings. <\/p>\n

Fig 2: Net Income growth (YoY), actual and estimated <\/em><\/p>\n

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Source: H\u00e9rens Quality Asset Management, Thomson Reuters<\/em><\/p>\n

While growth profile is important no doubt, so are fundamentals and valuation. Same as \u201ctaste\u201d justify (or not) the price, they provide you with an understanding of how much value you are receiving with each of the stock under consideration. <\/p>\n

Fig.3: Selected Valuation and Fundamental metrics<\/em><\/p>\n

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Source: H\u00e9rens Quality Asset Management, Thomson Reuters<\/em><\/p>\n

As it appears, for the mesmerizing growth of Company X one will be paying a fortune and, given \u201cred-zoned\u201d Altman Z and low Equity profile of the stock, this growth was primarily funded by debt that might have created some solvency issues. Company Z, on the other hand, looks the cheapest based on traditional valuation metrics, but if growth profile is included in the equation (PEG \u2013 Price to Earnings Growth), it turns to be the most expensive one, especially given a rather mediocre performance. It nevertheless has solid fundamentals and is a decent dividend payer. Stock Y offers you something in the middle \u2013 it is definitely not cheap, but its underlying financials are strong and it did provide sustainably decent returns in the past. Although one must not forget the general rule of thumb saying that past performance must not be used as collateral for the future one because tides might and do change. <\/p>\n

Of course, there is a huge chunk of information missing to make a qualified decision \u2013 like how well is the company run, how severe is the competition, what are underlying market trends, etc., and the list can go on. But for the sake of a simple exercise, given that all three are big, global companies with a good market position\u2013 which one would your choice fall upon? If Company X is the most appealing, then you are likely to be the type of investor who is ready to chase growth no matter the cost. If you chose Company Z, your risk appetite is definitely much lower and despite poor historical performance, you still see the value in the bargain and scheduled \u201cgifts\u201d in the form of dividends will keep you \u201clocked-in\u201d. If company Y caught your eye, then you most likely have inclinations to what we call quality.<\/p>\n

Time to open the cards<\/strong><\/p>\n

Now that the choice is made, it\u2019s time for the moment of truth. Company \u201cX\u201d is Tesla, Company \u201cY\u201d is Microsoft and Company \u201cZ\u201d is Pfizer. It should be hard to argue that Tesla is an utterly \u201chyped\u201d company where plenty of faith and expectations are embedded and depend on the success of one single person. In contrast Microsoft is usually seen as an \u201cold and boring\u201d story, while a crucial fact \u2013 that it has sustainably delivered progressive top and bottom line growth keeping its balance sheet quality and profitability in check \u2013 is very often being overlooked. Pfizer, as any other pharma giant, is a classic example of a defensive stock with common patent expiration issues and cut-throat competition in never-ending R&D race. Perhaps, 90% success rate in COVID vaccine is exactly what it needs to create \u201cbuzz\u201d so much loved by investors these days and break the losing streak. <\/p>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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A strategy is an investor\u2019s best friend Is it hard to be successful at investing? Well, that depends. Is it hard for a cooking newbie to succeed at French pastry with the first attempt? Even if there is a recipe, something most probably will go wrong if one has no idea how to determine if […]<\/p>\n","protected":false},"author":1,"featured_media":3585,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[37],"tags":[],"class_list":["post-4140","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporate-excellence-insights-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/hqam.ch\/en\/wp-json\/wp\/v2\/posts\/4140","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hqam.ch\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hqam.ch\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hqam.ch\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/hqam.ch\/en\/wp-json\/wp\/v2\/comments?post=4140"}],"version-history":[{"count":1,"href":"https:\/\/hqam.ch\/en\/wp-json\/wp\/v2\/posts\/4140\/revisions"}],"predecessor-version":[{"id":4141,"href":"https:\/\/hqam.ch\/en\/wp-json\/wp\/v2\/posts\/4140\/revisions\/4141"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/hqam.ch\/en\/wp-json\/wp\/v2\/media\/3585"}],"wp:attachment":[{"href":"https:\/\/hqam.ch\/en\/wp-json\/wp\/v2\/media?parent=4140"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hqam.ch\/en\/wp-json\/wp\/v2\/categories?post=4140"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hqam.ch\/en\/wp-json\/wp\/v2\/tags?post=4140"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}