I recently listened to the views of prominent fund manager Morry Waked of Vinva Investment Management, who reminded me that you have to avoid being emotional when investing and invest in what you know. Waked also implied that mispricing of quality assets is always an opportunity, but with interest rates so high and effectively competing with stocks, you just have to be more patient.

That said, eventually you will be rewarded if you stick to a consistent investment strategy that history says has worked in the past. So, with this in mind, I recommend you do what I often do, which is make an objective assessment about your core investing strategy and work out if you’ve allowed emotion to get in the way of a winning way to invest.

I’m not trying to be a killjoy with your investing, but you really should have a two-part investment plan. The first should take most of your money, which is your core strategy. Then you can have a satellite portfolio of speculative plays that could deliver some great alpha returns, but it has to be money that you can live without if these plays fail to deliver.

I want to talk about core investments based on what this fund manager’s advice that you should invest in what you know.

Now not many of us have real insights into finance businesses such as Macquarie (MQG), health operations such as CSL and Resmed (RMD), or the future of lithium plays such as Liontown or Pilbara Minerals.

Given our lack of knowledge, I like to see what experts who are paid to know these companies can tell me. This is what FNArena’s survey of analysts reveals.

1. Macquarie (MQG)

Consensus says +18.2%; Morgan Stanley says +30% and five out of five experts see a rising stock price.

2. CSL

Consensus says +40.8%; UBS has 45% and six out of six analysts see a higher share price ahead. The minimum predicted increase is 37%.

3. Resmed (RMD)

Consensus says +70.7%; Ord Minnett and Citi see an 80.89% rise ahead. Four out of six like the company while two are deliberating but aren’t negative on RMD.

These three companies conform to quality companies that look temporarily mispriced and it should pay to be patient.

Liontown and Pilbara Minerals are more speculative plays for the future and should be seen as satellite investments. They could be big winners, but anything could come along to rock the lithium game.

4. Liontown (LTR)

Consensus says +38%; Bell Potter has a +62% call and Macquarie 59.7% call, while four out of four analysts like the company going forward.

5. Pilbara Minerals (PLS)

Consensus says +23.2%; Macquarie is a big fan with an 80.7% rise tipped, while four out of five analysts like the company. Morgan Stanley sees a 12% fall ahead.

I think both LTR and PLS look like good bets. I use the word “bets” on purpose because I don’t know if they’ll be future winners, but I suspect they will be. The support of the analysts helps my confidence, but history can’t tell me much about these two companies.

On the other hand, MQG, CSL and RMD have history and their quality ratings on their sides. Their charts reinforce this view.

Note the similarity that screams “quality businesses” and history tells us to buy and wait. Be patient because interest rates are high, but one day they’ll stop rising and will fall and growth stocks, including tech companies will be in favour.

Similarly, smart fund managers are tipping that small and mid-cap companies will eventually do well, but again, investors will have to be patient.

Buying and having faith on mispriced quality companies and being patient is at the core of smart investing. It shouldn’t be an emotional motivation but an historically credible reason for buying the stock.

However, history can change. There’s talk that CSL and RMD will be affected by ‘miracle’ diet drugs that will reduce potential business because thinner Americans won’t have all the illnesses — diabetes, liver problems and sleep apnoea, etc.

This is why I think CSL and RMD have little to worry about these diet drugs: “At roughly $1,000 per month on average for medications that are typically taken over a long period of time, the drugs are straining insurers’ budgets. But many of the 100 million American adults who are obese can’t afford to pay out of pocket for the treatments, called GLP-1 agonists.” (CNBC)

Please note: I recommend buying “mispriced quality companies”. The key word is “companies”, which says buy a number so the diversification protects you from getting one or two companies wrong. AMP was a quality company that was a victim of bad management and big brand damage.

When it comes to PLS and LTR, these are speculative plays that I’d only load up on if I thought my core holdings were just right. That would be the time to patiently pile up on more risky but potentially lucrative investments.

What am I doing?

I’m going to increase my exposure to 200 quality companies via Beta Shares GEAR product that gives a magnification effect on any potential rise of the overall stock market. I expect an end-of-year rally rolling into a better 2024 for stocks. It’s a risky play on quality and as I know history says the overall market rises seven or eight years out of 10 and the average gain is 10%, I’m looking for a near 20% gain over the next 12 months. If it takes longer, I can live with that because patience and faith in the ASX 200 is based on knowledge, which ultimately is my competitive edge when I invest.

A lack of knowledge and fear can be just as dangerous for building wealth via stocks as this is investing emotionally, which is highly risky.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances