Last month, with the release of Michael Lewis’ new book, Flash Boys, which is about how high frequency traders have micro-second advantages on other traders for stock transactions, there was talk of the system being rigged.
Fortunately, Foolish readers need not worry about this because our goal should be low frequency trading, otherwise known as investing. Time frames for investors should be in years, preferably five to 10-year blocks, to get the full effect of business growth and compounding returns.
We concentrate on the company and its prospects, not on the share price, to base value upon. The share price should be the last thing to consider, seeing if the market is mispricing the stock to our advantage.
Investors would be better off with companies like Woolworths Limited (ASX: WOW), which has tripled its share price in ten years and regularly has a return on equity in the mid to high-20s.
It announced it will be spending about $1 billion over the next ten years just to improve its logistics to save more time and money. That shows patient foresight. How many micro-seconds are there in ten years?
Another market stalwart that keeps on going is Brambles Limited (ASX: BXB), the $14.8 billion global supply-chain logistics company that helps keeps goods moving from warehouses to stores. Between 2011 and 2013, underlying net profit has risen from $487.5 million to $730.1 million.
It could be seen as a cyclical company, so with the domestic and overseas markets improving generally, that may be a sign that Brambles will see more demand for its services.
If you are looking for a stock that moves a little faster, then Flight Centre Travel Group Ltd (ASX: FLT) could be the one. The flight and holiday reservations company is the domestic market leader that also does corporate travel management.
As consumers and business people travel more, its business has grown since the GFC, sending the stock from about $5 in 2009 to $52.76 currently. The company is expanding internationally to carry on its success.
Warren Buffett, the chairman and CEO of Berkshire Hathaway Inc (NYSE: BRK.A, BRK.B) once wrote to his shareholders” “Our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient.”
That is the perspective Foolish investors need for future financial growth.