QUALIPORT
The One Minute Investor

By Maynard Paton (TMFMayn)
March 31, 2003

'I'm a One Minute Manager.'

'You're a what?'

The manager laughed and said, 'I'm a One Minute Manager. I call myself that because it takes very little time for me to get very big results from people.'

So goes a conversation in the famous business management book The One Minute Manager. But can investors take very little time to get very big results from shares? Yes they can.

Becoming a One Minute Manager involves:

* One Minute Goal-Setting, and;

* One-Minute Praisings and Reprimands.

In brief, Goal-Setting necessitates employees writing out each of their objectives in less than 250 words (and so can be read in one minute). Praisings and Reprimands entail giving prompt, assertive and straight-to-the-point feedback to staff (which lasts one minute).

It all adds up to keeping employees clearly in the picture. If they know what they should be doing, are aware of their targets and kept informed of how they're progressing, so their performance and motivation will improve.

Just a minute...

On a similar basis, becoming a One Minute Investor requires:

* A One Minute Strategy, and;

* One Minute Company Reviews.

The One Minute Strategy involves laying down an investment philosophy in a plain, decisive, sub-250 word format. Applying regular One Minute Company Reviews then ensures your chosen shares remain true to the Strategy.

It all means the portfolio will be run in a strict but simple manner, leading to improved decision making and better investment results.

For instance, the Qualiport's One Minute Strategy is:

Buy great companies at attractive valuations and hold for the long term.

The portfolio's ideal company is one we understand, has a predictable future (by way of a sustainable competitive advantage), a proven past record, high margins, a high return on equity and is a strong generator of cash. The shares are valued by comparing the company's free cash flow yield to income on offer from gilts.

Sure, some subjectivity and research is needed to decide whether certain firms have 'predictable futures', suitable cash flows and so on. But the over-riding principles are clear and leave little room for manoeuvre. Huge amounts of effort can therefore be saved by eliminating shares not meeting the portfolio's guidelines. That time could then be spent concentrating only on suitable companies, whereby knowing more about less generally improves investment performance.

Unlike the One Minute Praisings And Reprimands, One Minute Company Reviews are one-way conversations. Companies tell you how they've performed (e.g. profits are up, the competition has become more intense, and so on) but, coming from a small shareholder, feedback to the boardroom is likely to fall on deaf ears. Nevertheless, by only applying short, snappy inspections, investors are forced to focus on the really key areas of the company's investment 'story', rather than get distracted with complex, extraneous factors or corporate minutiae.

Simply, does the share still meet the One Minute Strategy or not? In most cases, in doesn't take long in deciding the progress of a particular company. Like the One Minute Manager, an assertive, no-nonsense approach is required: sell if the company isn't coming up to expectations.

Summary

Few investors have the time to spend all day evaluating shares. Yet such a limitation should not prevent a decent portfolio result. All too often, shareholders with time on their hands get bogged down with trying too many strategies, looking at too many different companies and reacting generally to too much market noise. To paraphrase the old corporate proverb, 'research' will always fill the investment time available.

The strategic keywords of both the One Minute Manager and Investor include: simple, clear, assertive, focus, prompt, decisive, obvious. With time precious, the One Minute Investor must concentrate only on what's important and of significance. Remember, Wilfredo Pareto's theory of the 'critical few' and the 'trivial many'; in terms of the stock market, 80% of your investment returns will come from 20% of your work. Focus on that 20%.

Indeed, proof that the less time you spend, the better your returns can become is shown by the humble index tracker. Such products take up no time or effort yet, on past performance, still beat 80% of full-time market professionals.