With this weekly coming off the press, my blog has officially turned two years. Like I have done in August of 2023, I am using this time of the year again for a review to write down my current thoughts regarding the past, the present and the future. While last year’s review was a bit more multi-facetted, I want to discuss the topic of impatience and patience now and how it applies to my stock ideas.

Summary and key takeaways from today’s Weekly
– While it might sound a bit contrary to what investing beginners are told to do, I am a believer in a few uncommon things like bigger starting positions and cutting losers instead of averaging down.
– Over the years, one of my key learnings was to quickly part with losers in the portfolio, the more so if the initial thesis has started to see cracks.
– Patience is the key. Even the best thesis can take time to be discovered by the market. As long as thesis is valid and the risk and reward ratio favorable, I am staying with my ideas.

Note: This Weekly will be of a different nature, as I am not going to discuss particular stocks in detail. From next week on, you’ll get the “usual” Weekly format.

How time flies – 48 months and slightly more than 100 weeklies are behind us. On top, my members have received in total 24 research reports with my best stock ideas (18x Premium, 6x Premium PLUS) as well as many updates.

Certainly, that’s a first big milestone, but definitely not the finish line. Far from it.

I am as motivated as I am on day one – despite one or the other setback and also certainly due to one or the other of my stock ideas not having delivered, yet (but with lots of hidden values ready to be released). Of course, there were also a few disappointing picks I should have completely stayed away from. There’s nothing to sugarcoat, but to learn and make it better next time.

The truth is, though, in investing, it is not about a 100% hit rate and no short-term fanfare, but about long-term results. This is what’s driving me. And also what I am convinced of to be the right strategic mindset to pursue.

I am a firm believer in letting time play in one’s favor. Investing in stocks, besides some knowledge and homework (due diligence), requires lots of patience. As long as a thesis is valid, the volatility is almost irrelevant.

The more so if you are stress-tested in times when your ideas are not delivering.

With this, let’s get into it.

The average total return of my best stock ideas is currently a bit behind. However, I am confident this will change with time, as I have many catalysts inside of my active cases, ready to lift the stocks higher. The first could be even as soon as tomorrow (Friday, 16 August 2024, members received a short update via email).

With my risks-first approach (paired with high upside), I am able to find stocks with great returns.

Join me and my members on our journey to beat the markets!

^{both as per 14 August 2024 market close – since August 2022}

If you struggle to find high-quality stock ideas, let me inspire you. As a Premium or Premium PLUS Member, you receive my exclusive research reports with my best and market-beating stock ideas.

Act when needed, otherwise leave it alone

It is likely not a secret when I start this weekly with the comment that emotions should not lead an investor, especially not in a pro-cyclical way.

Buying high due to greed and selling low due to fear are good – first to lose money reliably and second also to hopefully learn one’s lessons.

What I have learnt to really appreciate over the years, is that there are two things to master when investing in stocks to dramatically increase one’s odds:

• cut losers relatively quickly – believe me and see below why
• let the winners run and don’t cut them prematurely, except there are very good reasons

More common, unfortunately, is to buy more of what’s not working anyhow (then called euphemistically “averaging down”) and to sell winners to “book profits”.

While this might sound a bit extreme, deep down there’s some truth to it. That’s my not necessarily commonly shared view and how I personally act.

So, what is it about – impatience and patience?

Regarding impatience and in general, I must say that in the past I have had a rather good sniff for what to get rid of. I have always been somewhat critical when something in the numbers didn’t work out or signaled a bad trend, but also when a stock price was falling pretty much.

In the beginning, I also tended to buy more, while waiting for a turnaround. In very few cases, I still practice it today personally, but most often I initiate a full position from the get go and observe it. Either my thesis plays out or not.

If it does, fine, I can let it run and don’t have to question myself why I initiated just a small position.

If not, and the stock falls, the likelihood of me having been wrong is more realistic than not. Then it is often appropriate to pull the plug.

What the latter – the losers – do is they block mental capacity. Instead of focussing on the winners in a portfolio and / or to look for new lucrative ideas, losers drag on the performance and on the nerves – sooner or later this is the case.

That’s one of two reasons why I have closed several of my ideas for my members again – despite not having a short investment horizon.

When facts or external circumstances change, the thesis has to be questioned.

Not all closed cases were losers, though.

Sometimes I just took profits because the valuation didn’t leave a high enough margin of safety and / or due to the risk and reward profile having worsened due to other reasons like politics or economic conditions.

11 of my 18 Premium cases and one of my six Premium PLUS ideas are closed.

And guess what, most often I have decided correctly – there is only one case where I could kick myself, but on the other hand I am convinced that the alternative I switched to has more potential (patience, you know).

In my spreadsheet, I am monitoring lots of things, among others how my closed ideas have developed since I tossed them. Below, you can see screenshots with data as of last Friday, 09 August 2024:

(certain rows are blanked as I haven’t discussed all closed ideas in public)

(the second to last column is the final stock price performance at close – without dividends – while the last is what happened after I closed the respective case)

Without making it too complicated, the takeaways from the table above are:

• my Premium PLUS idea Burberry (ISIN: GB0031743007, Ticker: BRBY) was a complete failure with –26.5%. However, not a disaster, as I’ve pulled the plug just in time as it has fallen by another 38% since – a painful loss, but manageable, as
• all other Premium PLUS ideas are still active and on average above the benchmarks – I am on track here (see below)
• My ideas for my Premium members have seen eleven closures in total
  • four at a loss, of which only two with double-digit losses, the other two with negligible losses of less than 4% each
  • seven at a profit, most due to reaching full valuation or to go risk-off, as certain new risks emerged – like the presidential election in Mexico potentially affecting my silver idea Silvercrest (ISIN: CA8283631015, Ticker: SILV) or due to not feeling 100% convinced anymore about Petrobras (ISIN: BRPETRACNPR6, Ticker: PBR.A), likewise due to politics
  • only three of my closed ideas have risen after I closed them – the first Pioneer National Resources has been acquired by Exxon Mobil (ISIN: US30231G1022, Ticker. XOM) in the meantime, while the second was bad luck as it’s up by 47% (this is the case where I switched to another, more promising idea with the potential reward coming soon). The third is up by 19%, though, I had to close it due to a weakening economic environment
  • the bottom line here is that on average my closed ideas have only seen their share prices up by a minuscule 0.2%, i.e. practically nothing – but I took profits and decreased risks on many fronts

This is important to understand.

It makes no sense to either hold onto a position without conviction or to be reckless and continue to hold an idea where clearly risks have increased, only due to not wanting to admit a mistake or to show signs of weakness.

Besides business-specific risks, please always keep in mind that valuations, politics, management decisions or the state of the economy can pose potential risks.

That’s what I am monitoring.

Regarding Silvercrest and Silver, it even seems that I for now have closed the case almost at the (temporary?) top of the silver price – which was not my intention in that sense to time the silver market, but a company-specific decision.

I am absolutely happy with my decisions here regarding impatience.

Coming now to patience and also endurance, I believe that my picks will do pretty well on average over the long run, even though several ideas have not played out like I expected, yet.

Also, one or the other idea might be a bit more volatile. One of the reasons I see is that my picks most often have comparably small market caps, however, they are liquid enough and far from being micro caps. But one or the other came with an equity capitalization of 1–5 bn. USD which is commonly seen as small cap size.

But herein lies the leverage and the chance for outperformance.

Starting with a look at my active Premium PLUS ideas, they clearly show that I am on track:

Regarding my active Premium ideas, the results aren’t there, yet. While it might be a bit frustrating, it isn’t for me. I did my homework and I know why I decided to open each case.

There’s lots of potential in many of those ideas to even double over the next 12–18 months. Among others:

• Even as soon as tomorrow, there could be a life-changing announcement (for the company, but also for the patients) from the Federal Drug Administration, regarding the approval of a new treatment for two rare life-threatening diseases.
• My latest idea is pursuing plans to split up into several publicly traded pieces – even under modest assumptions the upside is 50–100%. Currently, the market is discounting the entity because it is a conglomerate
• my idea to hedge against higher gas prices in Europe was published when the European gas price TFF was at this year’s lows and nobody talked about it. Now, the gas price is at a new high for 2024, even though gas storages are filled above-average and despite being in a seasonally weak period – now, people started to talk about it on Twitter, after gas rose ~50%
• my uranium idea has come down significantly from its all-time high in sympathy with the spot uranium price. However, now contracting prices for uranium have reached the spot level, indicating a bottom for the spot price. Likewise, demand is inelastic, i.e. utilities need to buy as they don’t care whether uranium costs 50 USD per pound or 120 USD – they need to keep up their business, otherwise the lights go out
• an idea I published in March 2024 has announced a takeover. Its stock will see a tender offer at a price that’s ~40% above the current share price. Either this goes through or there comes even a higher bid over the next week, as there have been several interested third-parties

I hope you see how my thought process works and that I am convinced about my ideas.

This doesn’t mean that all ideas will exactly play out this way. But the theses are solid with calculated and low downside, leading to favorable risk and reward ratios – even if it takes some more time than initially expected.

That’s how investing works.

And that’s why I am totally relaxed and patient – I need to give my ideas the time to either play out or to kill my thesis (then I will become impatient).

I have absolutely no problems showing my temporary underperformance and discussing the status quo. In the past, there were times when my ideas were clearly ahead. Now, some of them are lagging and from others I had to separate to keep risks low and not to fall into hopepium – hope shall never be the investment thesis.

Thank you all my members and readers for your support! Let’t together tackle year three which already saw a very interesting start to say the least…

Conclusion

While it might sound a bit contrary to what investing beginners are told to do, I am a believer in a few uncommon things like bigger starting positions and cutting losers instead of averaging down.

Over the years, one of my key learnings was to quickly part with losers in the portfolio, the more so if the initial thesis has started to see cracks.

Patience is the key. Even the best thesis can take time to be discovered by the market. As long as thesis is valid and the risk and reward ratio favorable, I am staying with my ideas.

By becoming a Premium or Premium PLUS Member, you get instant access to all my already published research reports as well as several updates.

Likewise, you qualify for eight, respectively three more exclusive reports with my best investment ideas plus updates on the featured businesses over the next twelve months.

Premium PLUS Members also get access to all Premium publications.