Saturday 31 January 2009

Making my own investments in HCM


   I've been sent a review copy of the US' # stock picker, Natalie Pace's book, 'Put Your Money Where Your Heart Is', and thought it might be worth a read particularly given that it's endorsed by one of the originators of the human capital concept, Gary Becker.

The book reads well, although I'm still a bit suspect about whether one strategy that has worked for Pace in the past will work for me in the future.  Nevertheless, there are some suggestions in this book I do want to use to try to make up a bit on the investments I've lost during the last year.

I particularly like Pace's suggestion to invest in something I love, something I feel really passionate about.  So, given that one of my passions is HCM, and also given my last post suggesting that we need to put more focus on HCM investing, I should perhaps look at investing in organisations which are themselves investing in their human capital and are tracking and reporting on the impacts of doing this.

This is a strategy that in any case seems to have worked well for Bassi Investments and a few other firms.  I particularly like the comment Lauri Bassi made to me that:

"What it has shown us is that we should invest in any company that hires us.  It shows they're serious about their investment in human capital."


So this is one thing I could do (I mean I could simply invest in companies that hire me, not ones that hire McBassi & Company!).  But I think Pace's book adds some useful structure to this strategy, without what I see as Bassi's overly mechanical approach.

When Pace writes about passion, she is really referring to a company's products, but she also understands the value of people to a company's success, and in fact, she describes her personal economic theory, by which she judges how well a corporation is poised to perform in the future, as:

"Is a company attracting talented individuals who are on the ball, or do the salespeople look beaten up and word down?"


So a human capital-centric investment strategy should be even more successful that a product driven one.

So, I'm going to think about, based upon my own knowledge and experience, which companies I believe are going to be the most successful over the next few years.  Pace also provides a range of practical tests (a stock report card) to apply to these companies as well, and warns that even in a normal year, it may not be worth investing until September.  But then shares have fallen so far, there are clearly possibilities that they may now start to rise, albeit this may not be far and it may not be fast (I've just been listening to the Davos crew discussing the "lost decade" of low growth - depressing stuff indeed).

I'll let you know what I do...



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