May 2019 – Keeping an author’s perspective in mind when considering an investment

by May 22, 2019Memos0 comments

In the “stock-write-up” world it is always important to consider the author’s perspective when considering an investment.  Even if you find a very good stock picker, a strong buy recommendation can be dependant on numerous variables such as:

  • The size of author’s portfolio in relation to their total net worth
  • The size of author’s position in relation to their total net worth
  • The author’s age
  • The author’s other employment/pension income

I mentioned in Episode 2 of our Value Stocks podcast that I have a 50% weighting to Berkshire Hathaway.  This weighting and investment reflect my current age, stage of life, the amount of employment income I have and the size of my portfolio relative to my net worth. 

Greater than 90% of my net worth is invested in stocks; and my personal and financial situation is one where I have a mortgage on my home, a family to support and little employment income relative to my net worth. 

I do not think that Berkshire is going to provide the best return out of all the stocks in my portfolio. The position reflects my overall confidence in Berkshire achieving a minimal rate of return that I think it can provide in the next 10 years. 

While Berkshire is a company that I think will outperform the S&P index over the long term, the investment speaks more to how confident I am that they will provide a better return than if I decided to pay down my mortgage. 

Berkshire Hathaway may not necessarily be the best investment for someone who’s portfolio is much smaller relative to their net worth, or if they are young with no financial obligations, minimal life responsibilities and employment income.

For example, when I had just graduated from university, I only had 2 stocks in my portfolio.  These were much more aggressive picks, but reflected the fact that I had an employment income that would eventually increase my net worth at a much more rapid rate even if those stock picks didn’t work out.

If you read a stock-write-up from an author who has a portfolio that reflects only 5% of his net worth and he/she is allocating an entire 100% of that portfolio to one stock, then that information certainly is important information to consider before following that person into an investment.

The point is, always get to know the people you are following and the perspective that they are writing from.  Everyone’s financial and life situations are different and it is an important aspect to understand the foundation of someone’s recommendations.   

If you have any suggestions, comments or feedback that you would like to share feel free to email me at

Enjoy the Journey,

Alex Middleton

Welcome to!

My name is Alex Middleton and I am from Calgary, Alberta.  I believe investing requires one to carefully study publicly available information in an attempt to develop a thesis based on reason and logic.  It also requires one to properly account for the unknown by applying probabilities and margin of safety to their thesis.  I hope you enjoy the content!