Few potentials

FSA group (FSA:ASX) and Credit Corp (ASX:CCP) are two companies I’ve been watching (stock price) for about 6 months. They tick some of my boxes and seem to be good investments.  However, since I’ve only just gotten around to reading their annual reports I’ve decided not pursue interest at this point in time. The sole reason is because I don’t understand the businesses well enough.  

FSA group seems to operate a diverse earnings model in an extremely profitable industry with economic moats and is trading on a P/E of 7.8. The company does however have a debt/equity ratio of about 430%. While, I haven’t looked in depth into this company I will need to update my knowledge on the insurance business and its products in order to better understand this company before returning to this businesses. To be blunt, it’s out of my circle of competence at the moment. One thing that did come to my mind was the extremely high remuneration senior management are being paid.

Credit Corp attracts me because it appears to be cheap and seems to have good management. They are buying into the US debt market however, as I’m unsure of the regulatory requirements over there among other things, I’ll leave this one alone.

Although these companies may rise 1% over the next year or 300% it won’t bother me because I’ve stuck to my rules which are of paramount importance (to me). As Buffett says, the best thing about this industry is that you can get paid to sit on your hands. He often compares it to Baseball, but you don’t have any strikes. If you let 1 pitch or 50 pitches go without swinging it won’t matter. He also says, you only need to have very few (about 5) good ideas to become successful. So, for now, I’ll let these go. I’ll still read into them because if I obtain the right knowledge circumstances may change.

On the other hand, I’ve been doing some more reading on Vita Life Sciences (ASX:VSC) which is a company I understand much better. I’ve identified this as a buy opportunity despite its steep price (P/E and P/B based). This company ticks so many of my boxes and is the most exciting company I've discovered (that isn't an REA type stock). Phisher's Scuttlebutt proves worthy here as I've visited many health food stores and spoken to customers and store owners, but yet to speak with its competitors. I’m going to have cash reserves so that if this stock pulls back further, I’ll buy more. This is one of Warren Buffetts most underrated traits; to have cash handy in order to swoop in when Mr.Market presents a good opportunity one day.