alternative assets, blogging, developed markets, diversification, emerging markets, frontier markets, growth investing, portfolio allocation, technical analysis, value investing
Surely about time I address this post to readers – the majority of these mea culpas are genuine apologies, the rest are probably just a little cranky:
i) ‘Sorry I didn’t get to your email/comment sooner…’
I like to think I’m fairly good at keeping up with your emails & comments – well, most of the time! As I’m sure you know, if you neglect to answer an email immediately, it’s all too easy to lose track of it. There’s also a daily mountain of spam I have to traverse – at this rate, I should be ditching the investing lark, ‘cos apparently I could be making an easy million squid a day instead… [I must applaud the sheer persistence & inventiveness of the Nigerian people – so definitely an economy worth considering! Guaranty Trust Bank (GRTB:LI), anyone?] But hopefully I get to (almost) every email in the end, even if it takes a week or three – if I don’t respond in a timely manner, just ping me again.
Unfortunately, I tend to suffer from a ridiculously compulsive version of ‘If you don’t do it well, why bother doing it at all?!’ So emails invariably seem to demand a specific & in-depth reply – um, which I often have to get ’round to completing… Might be a good idea to keep track of some of my recurring reader dialogue(s), and summarize/respond to them more systematically here instead – we’ll see, perhaps it might offer up a couple of interesting insights for readers.
But please, keep ’em coming, they’re much appreciated. Investing’s ultimately a pretty solitary activity, so ‘work’ socializing tends to be a more deliberate affair – emails/comments are a great opportunity each day to just hang out at the ‘water-cooler’ & shoot the breeze with fellow investors!
ii) ‘Sorry, yeah…actually, I did see that headline’
There’s obviously blogs out there providing excellent daily/weekly updates of the latest & most relevant news, weekly reading links, company & valuation updates, plus other interesting snippets & topics. Clearly, this blog isn’t one of them…
I’m definitely grateful for & awed by their industrious contribution, but personally I’m more than happy to rely on the fact you’re all reading & analyzing the same headlines as me! 😉 And from my perspective, individual headlines usually only add very incrementally to the mosaic of knowledge I already have about the markets, sectors & stocks I’m interested in. And in my defence, I also fall back on my Twitter account – I’ve somehow managed to accumulate an horrific 8,000+ tweets at this point, so surely there’s some interesting & contemporary tweets among them!?
iii) ‘Sorry I poured cold water on your favourite stock’
You kindly emailed me to recommend/discuss a favourite stock, you waited patiently for a response, and I finally replied & told you umpteen reasons why I didn’t like your stock (or its valuation). Um, WTF..?! [And even if I liked it, I’ll probably never write about it. Well, unless I actually end up buying it]. But c’mon – I owe you that, at the very least! By which I mean, a reply that’s not an off-the-cuff one-liner, or full of platitudes about how much – um, potential – your stock has… Because in my book, every stock you highlight is a potential gem – it goes on my list & gets analyzed just like every other stock I encounter. And I learn something new all the time, see my ‘Cheap & Interesting’ post. But I have to call ’em as I see ’em – it doesn’t mean I’m right, but I hope my real opinion is always of more value to you than a non-opinion.
And it certainly isn’t personal…don’t forget, I really don’t like most stocks! Because I’m always on a quixotic quest for a great story, great stock, great price. Most of the time, that means I like the price but not the management, or the company’s great but the stock’s over-valued, or I identify a compelling investment theme but can’t find decent stocks to match, etc… Perhaps I’m just hypnotized by the quest – I spend years keeping track of some stocks, waiting to pounce on ’em – but when I come across this trifecta of attributes, I invariably believe I’ve found something really special…
And why not dream accordingly: Keep sending me your ideas & your favourites – if you love a stock, who knows, I just might love it too! And if I do (and ever cash some winnings out of it), there’s a top-notch slap-up steak dinner in it for you (um, with me…) – maybe here, here, or here – give a few quid to charity, and I’ll even get you back with a special stock tip from my wallet! 😉
iv) ‘Sorry, I could document my incremental buys & sells better’
A bugbear of mine is not knowing how much skin in the game (if any?!) a blogger has, when he’s talking about a particular stock. Nobody needs to know pounds & pence/dollars & cents, but it makes a hell of a difference knowing their level of conviction. My own solution, for each stock write-up, has been to note my initial portfolio allocation for readers (in % terms). Unfortunately, I haven’t found an easy way to document subsequent/incremental buys & sells – they usually don’t strike me as post-worthy, which may seem an unusual perspective (esp. if I’m closing out a position). [NB: I do make a timely note of all incremental buys & sells on Twitter & in the Comments section of the most relevant/recent stock write-up].
But this reflects my investing approach – most positions are high-conviction (watching & waiting six years to buy something does that for you..!), so I’m slow to add or remove them. I’m also very conscious of the corrosive effect Fear & Greed can have on your investment decisions. I find it really helps to Average In, Average Out of a position, and technical analysis is often the best method of timing/scaling into these incremental transactions (so Learn Some Bloody Voodoo). [And a 140-character tweet’s usually perfectly sufficient to describe them].
And these days, I also Average Up, Not Down – endeavouring to only buy more on the back of good news (while also trying to never excuse bad news by averaging down…). I find such trades far more palatable (and they rarely require a fresh rationale, or a bout of second-guessing), even if it means paying up for ’em. As for closing out a position, now it’s often the last/small step in a series of well-flagged trades – and the stock’s ideally reached my fair value target…so move along, folks, there’s nothing to see/talk about here! [Sorry, this all sounds far too cosy – in reality, sometimes you’ve got to spin on a sixpence & bail out of a (losing) position that’s gone horribly wrong. Frankly, I’ve been very fortunate with my disclosed holdings in the past couple of years – only the small & silly positions have turned into real disaster(s), take Petroneft Resources (PTR:LN) for instance – ulp, please don’t…]
I suppose I could set up a more detailed/interactive portfolio tracker on the blog, but I’m wary of putting even more emphasis on performance (a semi-annual performance post’s bad enough already). If you’re ever been inspired to buy a stock I write up…it’s fair to assume you also like the price, and you’ve researched the story & the stock too! It’s got sod all to do with me boasting about out-performing, or excusing my under-performance – statistically speaking, they have precious little significance at this point…
v) ‘And sorry, I know it’s been a year…how about another write-up?!’
OK, that’s quite unforgivable really, but (again) see above… I’ve stressed this before, and I’m sure I will again – most of the time, a company’s story & valuation change pretty slowly & incrementally (esp. with higher quality companies). I also find a company’s future resembles its past far more often than investors might expect. Which probably explains why I don’t find news headlines, or even results, all that exciting most of the time – I’ll leave that hoopla to the financial media!
But results (& headlines) ideally provide an incremental reinforcement (of my investment thesis) & upgrade (of my fair value estimate) – a process which rarely demands a brand new write-up. And presuming you believe this is a good thing, you end up focusing (consciously/unconsciously) on stocks which can hopefully deliver this kind of glorious monotony. Maybe it sounds churlish, but offer me a choice between a stock which might deliver a possible double in a few months, and a boring & under-valued compounder which looks set to rack up 15%+ annual returns for years to come – I’ll plump for the ‘stodgy’ stock every time. Because, as an investor, I’ve learned it’s good for my quality of life & for my peace of mind – plus it tilts the odds in my favour…
[At this point, I have to note: If your fair value estimates tend to oscillate wildly month-to-month (even week-to-week), or as headlines hit the wire, the real fault may not reside in your portfolio – unfortunately, it might be time to take a look in the mirror instead. It’s a sure sign there’s too much fear & greed, and too little rigour & discipline, in your investment process.]
Another reason for my relaxed attitude: If a stock’s too difficult, I don’t buy it anymore…I simply move on!
Actually, I don’t include neglected & unloved stocks in this category – some readers have (very kindly) praised me for such buys in the past, but in reality they’re not so difficult to buy when both fundamentals and technicals are compelling (& well aligned). What I don’t buy these days, though, are falling knives: Sure, I love a good knife-catching story as much as the next guy – esp. one with a chart showing an exquisitely timed purchase – but these stories are riddled with survivorship bias. We never (like to) hear about the knives that keep on stabbing (all the way down)…or the investors who keep on trying & failing to perfect the trick. I’m also happy to pass on the likes of promotional stocks, junior resource stocks (well, mostly!), outright frauds, etc. – any stock really (take Quindell (QPP:LN) for example & its…er, missing cash flows), where I’ve no bloody idea if the stock’s actually worth zero or a whole lot more, no matter how much research I do. I could go on, but let’s just move on instead…
Yeah, I’m sure this means I miss out on some great stories & opportunities, but so what? I’m in it for the bloody moolah, not the glory – aren’t you?! There’s always plenty of other cheaper & safer & easier fish in the sea to catch… Plus I skip a lot of heart-ache, and definitely save on blog posts second-guessing & agonizing over my stock picks/buys and investment theses.
That’s not to say I’m asleep on the job. Far from it…believe me, you wait this long & put this much into your top stock picks, you watch ’em like a hawk every single day. Or maybe like a lion – long periods of lying ’round in wait, interspersed with an occasional burst of predation. [Hmm, that’s wrong…the lionesses make the kill, the lion just strolls over after for his fill!]. But if there’s a fundamental change in my valuation or thesis, and/or it motivates me to buy or sell a stock, I’ll certainly try to write it up afresh. Meanwhile, if you have questions about a stock I own – please, don’t hesitate to comment or email anytime. But I’m conscious many of my write-ups/holdings are 1-2 years old now – I look at them all the time, but revisiting them more publicly & thoroughly might be interesting for you & would definitely be useful for me. Let’s see if I get ’round to a few of them fairly soon..!?
vi) ‘Sorry…oh Lord, please don’t let me be misunderstood’
I think people often reflect their own biases when they read/describe the blog. Some see an Irish investment blog, others a blog about UK AIM stocks, while others would describe it as documenting a go-anywhere portfolio. [Which includes a large emerging/frontier markets portfolio allocation – this (still) appears to be relatively unusual, judging by most of the blogs I read]. Some readers have been kind enough to encourage others to read the blog regardless…because it’s really just about investing & investment analysis. Many would classify it as a value blog, others might see a surprising bias towards growth. While others focus on the more eclectic & alternative stock picks. And I’m sure some readers think I have no interest in the US market – not true, I own plenty of US assets, except they’re mostly listed…elsewhere! [Frankly, they’re much cheaper & safer than their US-listed equivalents. Examples include Tetragon Financial Group (TFG:NA) & Alternative Asset Opportunities (TLI:LN), and I’m still working on a similar (undisclosed) holding].
This really isn’t a complaint – people usually get what they really want out of something… But I do think it’s a nice reminder we should be careful of our biases when looking at both our own & other investors’ portfolios. I’m certainly not advocating diving straight into stocks, sectors & markets you know nothing about, but clinging rigidly to your comfort zone may be just as/if not more dangerous for your health – being the best sailor on a ship ain’t much use if it’s sinking fast in the middle of the Atlantic… Stocks change, valuations change, markets change, economies change – to avoid risk, and to seek opportunity, you need to change also... The more flexible & varied your investment approach – in terms of perspective & analysis – the more you’ll stack the deck in your favour.
I won’t be at all surprised to see the blog evolve into something quite different over time. I want to limit risk, but I’m greedy for opportunities too – greater diversification & less correlation are an obvious solution. Then again, I won’t hesitate to home in on specific neighbourhood(s), while also abandoning other large tracts of the investment universe – if I consciously decide that makes sense.
Despite my current emerging/frontier markets exposure, my stock picking is still biased towards developed markets. I mean really…who wants to fight the bloody central banks? [As I discussed in my last post]. But I have little doubt they’re sowing the seeds of destruction, even if we just consider the risks posed by potentially over-inflated bubble markets in the fullness of time. I suspect this will eventually force me to re-direct more of my stock/asset/fund selection towards Asia, Africa & other parts of the emerging/frontier world – meanwhile, I’m encouraged by the potential buys I’ve been finding in some of those markets. I’m also (for example) working on a long-term project to begin adding exposure to a brand new asset class – I expect it will probably become a valuable & major component of my portfolio in the future.
To be continued…
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