In all areas where people are judged, there are lessons to learn from the superstars of the area. If you think of sports and Cristiano Ronaldo who was voted the best footballer in the world. If you want to learn from him start with situps – he does thousands of them a day. Most of the us only do situps when we actually sit up. In the financial world there are famous people such as Warren Buffett and George Soros. Recently John Reese in an article titled Emulating the Superstar highlighted a report titled Alternative Thinking: Superstar Investors written by AQR Capital Management. The report compared returns by superstar investors to portfolios with a small set of buy and sell signals that tracked the investing style of Mr. Buffett, Mr. Soros and others. The conclusion it managed to have results that were close to the real thing.

Factor and style investing are gaining prominence for example with Mr. Buffett you really do not know which stock he buys but he does tend to buy stocks in a particular pattern. Mr. Buffett favors companies that have a long-term competitive advantage in their industries, with earnings that are predictable. This will tend to mean Mr. Buffett rarely buys outside of these companies, but which ones?

One can examine for value, quality (strong balance sheet) low volatility (small stock price swings) and the performance of the market as a whole. You can also, look at 10 year periods for consistent earnings, higher than average return on equity; the ability to repay debt; and if you do invest in this fashion you will be reward over the long term.

Linking to dividend paying stocks, many of these long term investments are companies paying dividends because they generate profits every year. The longer they generate profits the higher they trade on the P/E Ratio and with the dividend the total return is healthy. Slow and steady backed by homework for all the right reasons is a good lesson.

There are more questions than answers, till the next time – to raising questions.