Before I began typing this introduction to my semi-annual exercise, I poured myself a cup of Passion, a tea mixed and blended by my friends at Dandelion Botanical. I still have a passion for individual investing, but this has been the toughest year for me, and tough times benefit from external support – even if it is just a cup of tea. An important aspect of exercise though is to be consistent and pursue it even in tough times, as long as it doesn’t hurt too much. This edition definitely has a twinge or two associated with it, but like most exercise pains, the twinges are probably temporary and may be indicators of internal growth.
My process hasn’t changed. I described it in an earlier post (My Semi Annual Process). In general it is based on a Peter Lynch idea. I’ll quote from my own post.
“Basically, for every stock in an investor’s portfolio, the investor should be able to easily and simply describe the company and why they own the stock. For me that translates into a couple of hundred words. I describe, for myself as much as anyone, what I think the company does, their prospects and hurdles, and what I intend to do about it.”
Obviously the exercise is more fun when the stocks are climbing. This year my portfolio was hit hard by two main events that I wrote about in Triple Whammy and Irrational Markets. Since then I’ve been applying for jobs, which prompts friends to chime in with phrases like, “But I thought you were some sort of financial expert.” Nope. I have no training though I have decades of experience. Some of those same friends were the ones that asked me to write about my perspective. I can only claim to be an authority on my own life. A book resulted, Dream. Invest. Live., which inspired this blog. Hopefully I emphasized that investing is risky which is why I don’t think it is for everyone. Stock investing is riskier than most. Investing in irrational markets adds risk to that. Today’s level of irrationality is rare. Of course, positive irrationality is possible too.
Another friend took a different approach. Rather than dismiss my experience based on my lack of positive portfolio performance she reviewed my portfolio. She came back with a similar conclusion. In general, the companies that I am invested in are fine, imperfect, but fine. The stocks are deflated, but the value behind them persists. As I wrote the synopses I expected to be dismayed, but that thread came through. Too many of my stocks are trading at one-fifth or one-tenth their highs, but the companies behind them have continued to introduce products and grow. A few years ago these stocks were worth more and none of them were profitable. Now, some of them have had a few quarters of profitability or about to reach that stage.
By definition, irrational markets don’t respond to rational analyses, so until they do, or until they become irrationally positive, I will make as much money as possible from other ventures: books, photos, speaking, consulting, and maybe finding a paycheck job. I will also continue to exercise.
Here’s the end of 2011 edition of my semi-annual stock portfolio exercise. It is a long list of links to Investor Village, The Motley Fool, and Silicon Investor because I think the discussion should happen in a broad forum. Feel free to comment here, but also feel free to post links out to other sites as well. One of the greatest resources individual investors have is other individual investors. Our shared voices can be more powerful than any official financial institution.
And to all who’ve supported me, and particularly to those who’ve supported each other, Happy New Year! (Really. I am looking forward to 2012. Time to fly!)