Why the Best Investors Look Beyond the Numbers
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Einstein once said that not everything that counts can be counted, and not everything that can be counted counts. The more time I spend with my head in the stock market, the more I’m realizing just how true that really is.
In a world overflowing with information and data, it’s easy to forget that investing is part art, part science. And it’s never fully one without the other.
As a science, there are measurable metrics like free cash flow, return on invested capital, and revenue growth that help us get a sense for the health and quality of a business. They’re diagnostics, in a sense, that offer clues about whether or not a stock is worth owning.
But as Einstein said, not everything that can be measured is worth measuring.
Data is good, but there are enough ratios and stats out there to make your head spin. And if you’re not careful, you can end up spending more time analyzing what’s easy to quantify rather than what’s actually important.
On the other side of that, some of a company’s most valuable qualities can’t be captured in a spreadsheet.
For example, how do you measure the strength of a company’s supplier relationships? Or the trust it’s built with customers? What about the internal incentives that encourage employees to think like long-term owners?
It’s hard to put a number on those things—but they’re real, and they matter. In many cases, they’re the difference between an average business and a great one.
These kinds of things force you to bring your own eyes, experiences, and instincts into the process. It’s that intangible human element that makes investing an art, and your job is to recognize the worthwhile qualities that lie beyond what’s tangible in the numbers.
Now, some people might see all of this—both the art and the science—as a waste of time when you could just buy ETFs and call it a day. That’s understandable, but in my opinion, like Manfred Mann once sang, “That’s where the fun is.”
Back to the point, what I’m really getting at is that you don’t need all the data. Part of becoming a better investor is learning what’s useful and what’s not, and that’s what makes Einstein’s quote so valuable.
It’s a reminder not to overcomplicate the numbers (and to look beyond them), and not to let yourself get too deep in the weeds. Focus on the metrics that actually matter to you—and don’t obsess over the rest.
With all of that said, we all weigh different things in our research, so I want to hear from you: What metrics or qualities do you think separate a great company from an average one? Write to me here and let me know.
And if you want to learn about a big move I recently made in my portfolio, check out this video here.
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ICYMI 🎥
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🎧 The Bezos Letters - An epic episode of the Founders podcast breaking down Jeff Bezos’s shareholder letters, which heavily emphasize the importance of making decisions today that benefit the distant future—a mindset all of us as investors would be wise to adopt.
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SINCE YOU ASKED 💬
"If a company cuts their dividend, would you sell it right away or would you still hold onto it?"
- Alvaro | YouTube
Early on in my investing journey, I used to think that if a company cut its dividend, I’d immediately sell—no questions asked. But over time, I’ve come to realize that the context behind a dividend cut matters. It’s not always so cut and dry.
There’ve been a couple of instances where a company reduced its dividend and I chose to hold, with a recent example being W.P. Carey (WPC). Toward the end of 2023, they lowered their dividend after spinning off their office properties into a completely separate company.
In this case, I didn’t sell because, to me, the cut didn’t seem to stem from any fundamental weakness in the business. They had spun off a big chunk of their assets, so the dividend simply wasn’t sustainable at its old level.
Some investors would say a cut is still a cut, and that’s all that matters. But to me, the reason matters a lot.
Now compare that to a situation like Walgreens (WBA). They suspended their dividend earlier this year—and to be honest, you could’ve seen that coming from a mile away. All you had to do was look at the earnings and free cash flow trends to know the dividend wasn’t sustainable.
Source: Snapstock
If I had owned shares of Walgreens, I absolutely would’ve sold—ideally before the dividend was officially cut. Easier said than done, I know.
But the fact is, Walgreens had become a fundamentally weak business. And to me, that’s a very different story from what happened with W.P. Carey.
Despite its best efforts, Walgreens was deteriorating, while W.P. Carey was intentionally downsizing. Plus, I could’ve retained the income lost from WPC’s dividend by holding onto the shares of the spinoff company.
With all of that said, I believe that understanding why a company cuts its dividend is everything. If the situation is akin to something like a Walgreens, it's probably not a business you'd want to own anyway, regardless of whether or not they paid a dividend.
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LAST WORD 👋
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