Benjamin Graham's classic book The Intelligent Investor offers many lessons on investing, among them the importance of emotional discipline and learning to avoid your natural instinct to follow the crowds. For example an investor who simply buys in bull markets and sells in bear markets is unlikely to be successful. They are letting their investments' behaviour control their own. An intelligent investor will control their investments through their own rational behaviour. The intelligent investor is a critical thinker who understands the market constantly swings from highs to lows. Value-driven, he places reliance on identifying outstanding companies with great long-term prospects. Here are three to consider.
ResMed (ASX: RMD) We all need a good night's sleep and ResMed is a sleep treatment business that would currently fall into the intelligent investor's value category. The share price has fallen after an October announcement that first-quarter 2014 revenues grew slightly slower than expected. Expectations were high though and based on the company's impressive track record of growth through innovation it remains a sound investment at an attractive price around $5. With a strong brand and global footprint it appears to have an outstanding long-term growth trajectory.
Crown Resorts (ASX: CWN) analysts have been positive on this stock for a while and with strong prospects at home and abroad there's good reasons why. In 2013 two-thirds of total revenues came from its Melbourne hotel, leisure and entertainment complex but its operations in the growing gamblers' haven of Macau have seen the best revenue gains. Asians have increasingly high disposable incomes and with luck that will translate into bigger profits for Crown's fast-expanding Asian operations. The share price has seen some big gains recently but the outlook for 2014 and beyond looks positive.
CSL (ASX: TLS) develops life-saving medicines for intensive care patients worldwide and has forecast profit growth around 10% for FY 2014. The company has a truly global footprint, with over 88% of group sales coming from abroad it looks to have developed its own immunity from the predicted slowdown in the Australian economy. Due to the unique quality of its products the company also has excellent pricing power. In other words it can raise prices and profits without impacting product demand. A high-quality stock that investors should look to enter when falling markets present a buying opportunity.
Foolish takeaway
Intelligent investing requires neither a stratospheric IQ nor stellar education. One of the world's most intelligent men, Sir Isaac Newton, reputedly lost a fortune on the South Sea Company bubble. He got carried with the market's wild enthusiasm for the South Sea Company and invested nearly everything he had and nearly lost the lot! So always spread the risk, don't try to be too clever and look for proven quality and value every time.
