"You can't change the market, the market just is."
If you've been emotionally whipsawed by stocks over the last year, you may want to go back and read that sentence again. Those words of wisdom come from actor, investor, entrepreneur, and author Wayne M. Rogers. We welcomed Rogers onto Breakout to discuss his investing process and share some insights gleaned from his successful career.
Rogers says stocks today are being driven primarily by emotion, not fundamentals. In such a tape the advantage goes to those who keep their head and stick to their analytic knitting; a challenging task when corporate projections seem to change with every muttering from the EU. For Rogers, the research process for stock picking starts at the top.
"Look first at management." he says. "That's the key to a company." Rogers doesn't need a CEO who's filled the exact same role in other companies but rather the innate skills to handle different tasks. Anyone can fill their resume but the ability to inspire confidence in the troops is more rare. A good company head realizes he or she is "a manager of people, rather than a manager of that specific business."
As an example, Rogers points to Alan Mulally, CEO of Ford (F), a company he owns. A longtime Boeing (BA) exec prior to taking the top job at Ford, Mulally steered the company through the 2008 financial crisis without taking TARP money and still managed to keep the company focused enough to create products customers wanted three years later. Ford, who reports Q3 earnings results this Wednesday morning, has an improving balance sheet, and strong competitive position, two other qualities Rogers loves.
For the most part Rogers wants companies with strong cash flows, good EBITDA, and steady growth. He's "taken a shot now and then" at buying high-risk long shot names, but that's not his M.O. In deference to volatility, Rogers doesn't buy or sell his underlying holdings but will hedge out his risk by buying or selling options to lock in his gains.
It'd be easy to dismiss Rogers as an actor dabbling in investing; a mental lightweight getting attention because he played Trapper John on M*A*S*H. It would also be a mistake. Rogers has seen it all, done it all, and written the book.
Check out the video and let us know what you think.