Buffett’s Guiding Light
I was looking for a restaurant in Singapore’s Central Business District (CBD) for a spot of lunch last week.
Admittedly, we are spoilt for choice. But I eventually found one that satisfied all my requirements. The key condition was that it could offer value for money.
A star in the making
The restaurant that I chose, shortly after my visit, was one of 11 eating establishments that were awarded a Michelin star in the latest Singapore Michelin Guide.
I am really glad I got in before others decide to give the place the once-over. It is quite possible that prices at the eatery could rise, if demand increases. It might also be harder to get a table, now that it has been recognised.
Investing can be a bit like that too.
There are few things more rewarding than finding an undiscovered stock that eventually turns into a star. So where do we look for these hidden gems?
Just like the jewel that I discovered on Boon Tat Street, stock market hidden gems are often right under our noses. But they won’t be heavily publicised.
And when they are eventually acknowledged, they should still be gems. But they will probably be much pricier.
A sackful of dollars
Recently, Warren Buffett invested a sackful of money in a relatively unknown Real Estate Investment Trust.
We all know about Buffett’s love of cash flow. It goes beyond being legendary.
But I never thought I would see the day when the Sage of Omaha would whip out his wallet and actually buy shares in a REIT. But he has. His purchase boosted the value of the company by more than 10%.
He has splashed out $377 million on a near 10% stake in the business. He is now the company’s third-largest shareholder.
As a big fan of Singapore REITs, I have always appreciated the things that they can do for me. However, I will be the first to admit that REITs are not the sexiest of investment….
…..They usually lack the excitement that some growth companies can provide.
Thrills and spills
But they can produce oodles of cash, which, in turn, gives us lots more opportunities.
Buffett often stresses that investing is about estimating the yield on an asset over the lifetime of the asset.
That has been my guiding beacon when looking for shares. I would like to think that I get it right more often than I get it wrong.
But here’s the thing: I don’t go out for looking for thrills…..
…. However, excitement generally finds its way into my portfolio in the form of regular income.
In my opinion, there is nothing quite as intoxicating as watching cash flowing into a trading account, regularly. It gives us options to do whatever we want, whenever we want.
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A version of this article first appeared in Take Stock Singapore. Click here now for your FREE subscription to Take Stock – Singapore, The Motley Fool’s free investing newsletter.