Ideas can come from anywhere. Whether you are using a new game-changing software at work, are being hounded by your kids to buy them the latest fashion trend, or you tried the most delicious new food or restaurant…these are all experiences that could lead to your next great investment, writes Berna Barshay, editor of HedgeFundGirl.
Here’s one anecdote to illustrate this concept…
Back in 2011, I read a random article in the now-defunct Entertainment Weekly magazine about the casting of a promising young actress in the adaptation of a popular Young Adult novel. I had seen the actress in a small indie film and thought she was a huge up and coming talent.
Then something in me clicked, and I realized I had been seeing tons of teens in my neighborhood carry the book upon which the movie would be based. So, I picked up a copy of the book to check it out… and I consumed it in one weekend!
While I was a Comparative Literature major in college, I am a woefully slow fiction reader and am terrible at getting through fiction books these days – all my literary friends will attest to this. The fact that I tore through a whole book in a weekend means it was really a page turner.
It turned out the film was being produced by a movie studio that I had owned stock in earlier in my hedge fund career. It didn’t take me long to run though the financials and determine that if the movie did even $150 million at the domestic box office, the company’s stock would at least double. That was the financial analysis piece…most good analysts could have figured that out, if they took the time to assess it.
But the key insight was the qualitative one. That the story was a winner, and the casting of the heroine was spot-on. I believed strongly that based on these two things alone, the movie would be a hit. That’s qualitative analysis – and it’s art rather than science.
Because of the element of conjecture or gut feel in it, many investment pros eschew it as an input. But I think that’s a mistake – because qualitative judgment is the special sauce that makes us unique as investors.
The actress was Jennifer Lawrence, and the movie was The Hunger Games, which went on to make $408 million at the domestic box office and spawn three profitable sequels (as well as a prequel that is coming out this fall). The studio was Lionsgate Entertainment (LGF/A) and its shares went on to quintuple in the three years after I read that magazine article.
Bottom line? Again, investment ideas can come from anywhere. Your unique personal history can put you at an advantage for having your mind click about a potential investment the same way mine did with Lionsgate and the Hunger Games franchise.
