Lessons from 2019
Things I learned or lessons that were reinforced:
Don’t let other people influence you too much. If a case doesn’t make sense to you, even though it seems to make a lot of sense for others, you probably should stay out. One can’t “transfer” conviction and if you don’t really know wny you bought a stock, you will never know if/when you should sell it. Furthermore, you will probably not have the fortitude to do the “right” thing during volatile price movements. This is the main reason why I personally put in a lot of time and effort to explain why I am bullish on my favorite stocks. If it makes sense for other people, then they will also hopefully develop internal conviction and won’t make extremmely emotional decisions. It’s also helps protect myself by high-lighting arguments that can be challenged which can give valuable feedback.
People. I’m not a geologist nor a mining engineer so there will obviously be a lot of potential traps that I won’t see coming. So many things can go wrong and I feel the best way to protect myself is to simply make sure that companies that I invest in are run buy good and competent people with skin in the game. I will never know more than insiders of a company, so if management is very competent, then the project said management have chosen to work on ought to have relatively few insurmountable problems etc. Good management solves problems and bad management creates problems. Lastly, I would say that time increases the likelihood of a positive returns for a company with good management, while time is your enemy when a company is run by bad managament. In short: If you are a relatively passive HODL:er, then people becomes extremely important. Ps. Now you probably understand why I love to invest in Quinton Hennigh companies.
Stop getting too excited when your favorite cases revalue higher because this also means that a “no brainer” probably got a bit less of no brainer. Unless one has already bought a full position in a company, one should root for lower prices and thus a higher margin of safety.
… On that note I think that my investing strategy has more and more gravitated towards trying to find these “no brainers” and when I do, I go big. There simply aren’t that many around and it’s very hard to stay up to date with a bunch of companies even though diversification is the typical rule for capital preservation… In short; I rather have a concentrated portfolio of what I percieve to be no brainers than owhing 10-20 possibly mediocre companies where I have a hard time to be up to date with developments and that can result in medium/low conviction followed by rash decisions.
Realistic goals. This is something that I have tried to really hammer into my conscious and sub-conscious. It’s so easy to get tempted by “what ifs”… What if I buy a large chunk of grass root exploration company X and they hit it out of the park? Such what ifs makes me greedy. Don’t get me wrong, I would love to be all in a stock that becomes a ten bagger in a few months after an amazing drill hole or two. BUT, I think people constantly overestimate the odds of success, which makes such what if scenarios pretty deadly for a portfolio. Instead, I nowadays constantly try to remind myself that I should look for companies that I think have a pretty low chance of going down a lot, while also having a relatively good chance of either revaluing (intrinsically cheap) or creating 50% of intrinsic value over the next 12 months. In other words, I’m trying not to get lured into the “get rich quick” mentality and instead focus on “getting rich” in time. This has resulted in a portfolio with very little capital invested in pure grass root exploration plays and a lot instead invested in growth stocks with some meat on the bones already. I’m willing to pay up today for (probable) future growth if I think it could still return around 50% in a year. I’m not that willing to bet much on a 10% chance for a 10-bagger.
What I look expect/forward to in 2020:
First of all I expect commodities to do well overall. Especially gold and silver. Thus I will start the new year with being pretty much only invested in primarily gold stocks. Thankfully, I think that 2020 could be the best year yet for my favorite gold stocks so I haven’t felt a need to shuffle my portfolio even though 2019 was a good year for most. This will however test my discipline since I find it a bit boring to not have a lot of companies to evaluate for a potential spot in my concentrated portfolio. In other words: I find it difficult to sit on my hands even though it can be the hands down superior (in)action.
Lastly, I hope I keep getting lucky!
A slighty different rant done a few days ago:
