Reputation: a sustainable strategy for smart investors

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The vocabulary of investment analysis is not enough, in general, and measures and ratios and tracking errors, but no long-term investment is particularly pleasing "rumors."

Despite sounding like something Robert Robinson might have said on Call My Bluff, in the 1970's, rumors inversion technique is important.

Derived from the tank of the ship around which sailors would gather to share the latest gossip in the sea, rumors refers to any qualitative information that the best investors are combined with board layout and numerical calculations to evaluate an investment . This is gossip and information from those who know him, but it is also personal observations and views that investors get to go out and kick the tires.

Rumor was popularized by Philip Fisher, one of the pioneers of modern investment techniques that he wrote in the 1950s about the importance of gathering information from all possible sources of a seminal book on investment analysis, equity and earnings uncommon. Fisher was inspired by Warren Buffett and was a key influence on Peter Lynch of Fidelity (AMEX: LGL – news , Magellan fund manager between 1977 and 1990.

Fisher uses rumors when they alighted at Motorola (NYSE: finance.yahoo.com / q = s MOT "> MOT – news . at once a humble radio manufacturer of the value of their share grew 20 times over two decades Lynch was convinced of the importance of using his . and the personal experiences of others in companies that invest in, "Every time you buy in a store, a burger or buy new sunglasses that you have your valuable comments. While browsing around you can see what's selling and what is not. "I remembered the importance of the rumors a week ago when I had the misfortune to fly with British Airways (Other OTC: BABWF.PK – News . Edinburgh Gatwick Like most travel stories war seems more fun that vanishes in memory. At that time, I and my fellow travelers were fuming.

I will not bore you with all the details, but a quick search on Google (NASDAQ: GOOG – s = GOOG "search> news news find lots of pretty accurate description of the bizarre story of a captain trying to get away before the Red Arrows display to close the airport, a mobile phone that allegedly fell on the asphalt of a window cab and a four and a half hour delay to find a replacement pilot.

The rumors aspect of this story is less about the actions of a driver in a hurry, but rather the failure of BA to tell us at any time what was going to make a serious attempt to relieve our discomfort or leave that separates us from the plane, we offer compensation or even a proper apology, or to answer my questions from the plane and on Twitter.

My attempt to contact BA to use social media rumor shows how it is potentially a much more powerful force in the 21st century, when Fisher and Lynch used it in 20. Get the low down on a company that is interested in is a simple matter today than it used to be when the information is managed more closely.

When I was looking to see if BA had bothered to respond to my tweets, I had the opportunity to see what everyone else thought of our national airline. BA To be fair, though not the only complaint of the service, there were plenty of others who describe the happy experiences of unexpected improvements, etc.. And therein lies the danger of an over-reliance on extrapolation from personal experience, what might be called first-hand hearsay. I could not feel the same airline, but it would be prudent to review the investments in my experience alone.

Other aspects of rumors about the company's suppliers, customers and competitors remain an essential part of the investigation of 360 degrees that proper management of the assets of an investment portfolio involves. In fact, one of the main differences between investing in assets and liabilities and why active funds cost more followers. In a globalized market is really looking for in a company from all angles is not free.

A colleague of mine just returned from China where he spent a week trying to discover what was causing prices of commodities today. Came to believe that a slowdown in China (to curb inflation in the country could be bad news for the entire complex products and returned with a more nuanced view. The outlook for copper (which is good, there remains a housing shortage large is very different from that of nickel (which is bad, the Chinese have very good production at very low prices. As the right, not a bluff in the program definition of Robert Robinson could have read: rumors an essential part of the toolkit for an investor.

tomrstevenson@fil.com

Tom Stevenson is an investment director at Fidelity International. The opinions expressed are his own.

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