Originally Posted by
SailorRob
Apologies Kiwical and Bikeguy for my reaction.
I agree with not needing to have a nuts and bolts deep understanding of every nuance of a business.
It's the part 'My main reason for buying OCA is the ageing population. Simple as that for me'! That got me going.
Seriously we need to be better than this, we need to think through the implications of things and ask 'and then what' for everything.
Identifying a trend such as an aging population or a market that is guaranteed to grow will give you no reason whatsoever in and of itself to make an investment and may actually in most cases be a negative thing. To understand why this is you need to study the base case rate for these things over time.
The only exception may be of you have identified a market or trend that others have not.
Generally speaking, if there is going to be an obvious growing demand for something, such as an ageing population, in a free market economy this will attract capital and resources This could be from a range of sources like a new retirement company IPO using the story of 'aging population' to entice 'investors', current listed companies competing for this increased demand and overbuilding, small retirement business owners expanding their facilities or starting a new small village - the list goes on. The obvious demand can be the death of the industry.
Do a study of the obvious demand coming into the commercial airline business in the mid 20th Century, the Auto industry... The THOUSANDS of bankruptcies and the three of four companies that made it and then THEY went bust too.
Look at mobile phones - demand obvious and the top dog Nokia... Well obvious.
There are so many bloody examples, why would you think this is different?
Aside from these points which BOOKS have been written about, let's touch on another more obvious point.
The future demographic characteristics are extremely well known and modelled, there is high quality data out there for all to see, we can even see different projections to include different immigration levels, different average lifespans etc.... So this is to say that it's NOT a reason to buy OCA due to the aging population as this is fully factored into the price you're paying as you dont have information the market does not.
The worst thing is thinking like this will actually also misprice the stock in the upwards direction meaning lower returns.
So to even say that the aging population is a reason to buy is bad enough. But to say that it's the main reason is sheer madness and then to insinuate that due to this profound insight you don't need to know much of the nuts and bolts as it's just 'this simple' - having the same insight as everyone else and expecting this to be a reason to buy...
I see in another post, you made a comparison with Japan, i.e. what has happened to the Japanese population... So did you then conduct a study on how this affected the aged care industry there? Did you look back to a time when they were faced with the aging population coming on, and see how the demand was met? Did buying retirement companies back then lead to incredible returns, average returns or low?
Well hell this was enough for me to put down the Sheet which I was rebuilding and issue a pretty harsh response.
Come on people - you have to EARN that money that you're investing, don't do stupid $hit. Think how many hours that it takes AFTER tax to obtain that money and maybe spend that amount of time thinking about things before investing it.
Don't go to all the effort of getting money and then being like 'ohhh myyyy, duhhhh NZ population is aging, I'll buy OCA - its that simple duhhhh...
Sorry but come on.