Notes From The Interview With Cory Fleck

I had the pleasure of talking to Cory Fleck of Kereport.com today and prior to the talk I prepared some notes regarding my thought process for making an investment decision. Just in case my points did not come across as clear as I had hoped, I thought I would share said notes:

General comments on how I breakdown/look at stocks:

• Core position must have: Good people involved
  • Past successes and relevant experience. Have they done this before, knows what success looks like and how to get there?
  • Are they working for a salary or hunting for success?
    • Do they actually WANT results or just want to stay alive and delay?
    • I want them to see them take the risk of spending some of that money that would otherwise just support their salaries.
  • High insider ownership (preferably recent insider buying as well)
• What is the ceiling for success relative to the company’s valuation
  • As Brent Cook likes to say: Is success worth it?
  • ROI differs between drilling a big target and a small target, but costs might be the same.
  • Example: Spending 5M to drill off a project with a blue sky case of 100 M vs 500 M. Big difference in implied EV and ROI for each case.
• Looks undervalued: Try to find out the reason(s) WHY the company might really be undervalued
  • Is it boredome?
    • Impatient investors cant stomach to wait 3+ months for the next catalyst?
    • Company being in the “boring phase” on the Lassonde Curve?
    • Opportunity: Superior patience
  • Is it an unknown story?
    • Examples:
    • A spin out
    • A new company
    • An old company but with a new project.
    • Opportunity: First mover advantage.
  • Is it because the market does not understand the case/projects?
    • Unconventional case or and/or a complex case
      • Example: Novo Resources (unconventionally large land package and geology)
    • Opportunity: Superior understanding
  • Is it because they have multiple projects/value propositions? (market only tends to focus on one asset)
    • Spin outs can solve that
    • Selling of projects can solve that
    • Bringing the projects to production can solve that (Will need good backers and access to capital!)
    • Opportunity: Superior understanding & patience
  • Is it because the market is so risk averse that upside is not really discounted and the risks are over-discounted?
    • Opportunity: Superior discipline and objectivity
• If I don’t find a simple reason(s) why it is undervalued, that can be traced back to human psychology (listed above) then I will probably stay out.
• If you can find a case that has more than one human factors in play that can be taken advantage of then great!
• I don’t expect to be smarter than the market, but I can try to be more disciplined and rational than the market on any given day. Bob Moriarty talks a lot about this in his new book, which I read last week.
• Fitting poker saying: “If you can’t spot the fish at the table, then you are the fish!”

… Then it comes down to internal hierarchy between the different stocks. A stock being undervalued does not suffice. It must provide a good enough value proposition (risk/reward) that is superior to an existing holding.

I don’t really think much about diversification and often have a concentrated portfolio, so it will take a lot for a stock to become a core holding, because it must be better than 99% of the stocks out there in my mind.

Important tip: Don’t let share price act as substitution for Due Diligence.

Best regards,

The Hedgeless Horseman

Follow me on twitter: https://twitter.com/Comm_Invest

Follow me on CEO.ca: https://ceo.ca/@hhorseman

Don’t forget to sign up for my Newsletter (top right on front page) in order to get notification when a new post is up!

If you find my work valuable and want to help me keep publishing most of my research for free then please consider making a donation, no matter how small.

(There is also a donation button in the top right of the home page)