Tau Liang's Blog

[Disclaimer: The opinions expressed herein are my own personal opinions and do not represent my employer’s view in any way. This post is provided “AS IS” with no warranties, and confers no rights.]

I never failed to amaze me how much you could get out of a Coursera course. For example, last quarter there was this course called "Computational Investing I", which teaches quantitative approaches to investment. It is one of the best classes I took, ever. It covers basics of event study, market simulation, back testing, and technical indicators like Bollinger Bands. It laid a good foundation for people who want to do their own quantitative analysis using Python, and for further study.
If you pay enough attention, good ideas will find their way to you. It is no exception in personal investing. This course opened my ideas to some personal experiences that stood out in the past.

I’ll start with an example that happened recently. I was taking an online class from a prestigious technology giant (whose name I shall not disclose). These online classes are highly popular and in high demand, as it offers the ultimate flexibility of taking it within a few weeks of time, it boasts of some hands on labs, and of course, it is priced very close to those in-person live training classes. In a nutshell, it is a very high margin business, which probably explained the high flying stock price after IPO and its high P/E. The class was pretty good, until I started to do the labs. The lab server went down every couple of hours. I diligently submitted support tickets, followed up with phone calls with support to get the issue resolved. It was good for another day, but then it kept going down again and again afterwards. I got on the phone with support for hours, and finally got it resolved, so the server stayed up until I was done with the training. It occurred to me that it was pretty bad customer experience, and this experience cast serious doubt on the high availability features of their products, and I would to that far to say that this company was struggling with some serious internal issues as well. It was probably a coincidence, but it came as no surprise that this stock dropped like a rock in the months after that.

Another example was an online travel service I’ve been using since I started my professional life more than a decade ago. I really liked their service, and the prices they offered were unheard of from any discount/loyalty program for the hotel chains. Best of all, they constantly exceeded my expectations on multiple occasions that I had to cancel trips in the last minute (e.g., when snow storm hit the unprepared airports and caused flight cancellations). On hinder sight, this was really a great company that treated their customers well. And I had no reason to think that it would not to enjoy a epic uptrend like the chart below shows:

So what is the takeaway here? I am not in a position to give out investment advice here, nor should you, my friends, take it seriously as investment advice. But it is clear to me if a company treats their customers well, its value will go up, defying gravity. On the other hand, if a company doesn’t build solid services or products, the fall of value in its stock is inevitable. It is just common sense, and one doesn’t need to read 100 books on management to come up with this conclusion.
This is just an example of reflection on life experiences will enable us to gain insight into personal investment in stocks. With such insight in mind, building a quantitative strategy for equity investment would not be that hard, but I would not bore you with the details here.