Norman F. Klopp, Jr., CFA, Partner

The progression of words in the diagram below is a concise depiction of the investment process.

But if I relate that progression to the massive increase in data and information, combined with accelerating regulatory changes designed to “help” professional and individual investors, the result is a massive increase in data and information with little regard for knowledge and decision.

At Midwest Investment Management, we seriously question the true value of these changes and believe that, in many cases, these changes have made the job of professional and individual investors more difficult.

While controversial, our opinion is reinforced every time we read about legal and regulatory attempts to create a “transparent” corporate environment.

So we ask: “What is the value of ‘seeing’ everything if you don’t know what you’re looking at, or looking for?”

Terse reports

To put all of this into perspective, I remember a time in the 1960’s when one northeast Ohio company I followed as an analyst published its quarterly earnings in the hometown newspaper, no place else. The report had three lines: sales, net income, and earnings per share. Today, individual and professional investors can locate a depth and breadth of data about companies that is unprecedented, and in many cases unfathomable.

Abundant information

We can go to the SEC’s Edgar website and read every required SEC document for every publicly held company. We can go to corporate websites and read volumes of information about products, history, finances, press releases, quarterly reports, and annual reports.

Many corporate websites offer webcasts of conference calls detailing quarterly earnings or other significant events. We can use a search engine such as Google, enter a topic, company, event, or product and get hundreds of “hits”— stories and information sources.

And if we really want to raise the risk level, we can enter internet “chat rooms” where “investors” (I use that term loosely) communicate about companies and stocks. I repeat: “What is the value of ‘seeing’ everything if you do not know what you are looking at, or looking for?”

Data is not knowledge

This abundance of information falls primarily into the Data category shown in the progression of our title above. Some Data could be classified as Information, but none of it can be called Knowledge. Why not? A dictionary definition of knowledge is “an organized body of information.” And the verb “know” means “to understand and be able to use.”

A test my partners and I use to determine the credibility of information, and its importance in the investment decision, involves asking ourselves if we understand the data and information sufficiently so that we are able to use it. With decades of individual and c o l l e c t i v e i n v e s t m e n t experience, we are constantly working to “organize the body of information;” to “understand” it; and then “use” it.

The final factor is “Decision.” Data and information are useless unless they can be organized and understood, thus becoming knowledge. Knowledge is useless in the investment process unless it results in “the ability to form clear opinions and act on them,” the dictionary’s definition of a “decision.”

For our clients’ benefit

At Midwest Investment Management, we combine decades of experience with a disciplined process. We focus on determining the credibility and importance of data and information that increases our knowledge while facilitating investment decisions for the benefit of our clients.

Norm Klopp’s disciplined approach to investment decision-making has produced attractive long-term results for clients with managed accounts. If your portfolio is not currently benefiting from Norm’s stock-selection process, you are invited to contact him at (216) 830-1135 or nfk@mimllc.com.