Can you explain why you own what you own? That’s the basis behind my semi-annual portfolio review. Can I describe why I own my stocks and what I intend to do with them? After a few years, it also helps chronicle whether my rationale and expectations have changed, and whether the performance is worth the effort. For traders and speculators, reviewing stocks every six months is far too infrequent. My goal and practice has been to invest for the long term, be patient, and minimize the time spent investing to better maximize the time living. (For details, read – and maybe even buy – my book, Dream. Invest. Live.) The strategy succeeded well enough for decades that I was able to retire at 38 and stay at least semi-retired until about six years ago. Perfect storms of bad luck happen (as has been confirmed by independent and informed observers) which is why I’ve had to energize my consulting business and now extend it to as a real estate broker.
In the last few years, my diversified portfolio has become less diversified. Stocks like Real Goods Solar were in good markets, but mis-managed and delisted. Stocks like GigPeak were in good markets and succeeded, but were bought out before the benefits could pass through to the shareholders like me. The remaining stocks are either in growing markets, or have disruptive technologies, or both; but the last six months have not risen their stock prices. Each has made advances, but most have fallen short of expectations. Small companies falling short of expectations are easily overlooked by financial institutions when the mega-cap stocks are setting new records. Without headline news, small companies can languish and portfolios can stall or fall, hopefully only temporarily.
I closed the mid-year report with the hope;
“So stands the portfolio at the end of June 2017, the end of the first half of a year that I thought was going to be far more profitable when I looked at it five years ago. Six months remain. It may yet please and surprise me.”
Alas, the surprises were losing Real Goods, watching GigPeak be bought out, and then watching its replacement Neophotonics drop 50%.
The potentials for each company remain high, but dilution decreases the benefit to stockholders, delays provide advantages to competitors, while my personal finances remain less than enough. Money holds too great of a taboo in modern society, even while its power grows. Challenging that taboo is why I am open about my finances. The best way to get people talking about a taboo is to start talking about it. It may be embarrassing, but the conversation can be valuable – especially, when it includes the ups and the downs that are the realities of individual investing.
For the details of my investments, I post the semi-annual review of each of my stocks on various discussion boards. I could post the entire collection here, but 1) it would be very long, 2) the more public the conversation the more valuable it becomes, and 3) reading my posts on those boards introduces you to individuals who have different perspectives, strategies, and experiences. Collectively, those communities are more powerful than large financial institutions because the motivations and incentives are those of similar individual investors rather than that of profit-minded corporations.
For those who prefer skimming through the stories, here are the synopses of the synopses/reviews.
AMSC is a electricity infrastructure company that has its origins in superconductors. They are now also known for designing wind turbines and systems, power system regulators, high-efficiency motors, connecting the US power grids, and superconducting cables. While the potential is high, the current reality is far more subdued. Part of AMSC’s potential has been supporting the distributed renewable energy systems of solar and wind power where maintaining high efficiency in the transmission lines is important. An opportunity to significantly upgrade electricity power grids seems to be overlooked in Miami, Houston, and Puerto Rico. Tres Amigas, the project to connect the US power grids, doesn’t even show up in a search of AMSC’s site. If AMSC had continued its revenue growth from 2015 and 2016 into 2017, AMSC might be reporting a profit. Instead, losses continue.
Asterias is a leading edge biotechnology company pursuing treatments for nerve injuries and for multiple cancer treatments. While all of the treatments are in early clinical trials, the lack of successful competing treatments, and the public awareness of the significance of the maladies means successes are celebrated more than with other firms. The leading news-worthy candidate is regrowing damaged spinal cords. In particular, one patient has shown such improved upper body motor function that he is able to throw a baseball. While the potential is great, the complexity of achieving FDA approval is also great. From a conventional perspective, many years are involved in completing phase 2 trials, phase 3 trials, completing the application process, commercializing the treatment, getting paid for the treatment, and reporting on the revenues in a quarterly report.
Geron is a leading edge biotechnology company specializing in the technology of managing telomeres: the molecules at the end of chromosomes. Telomerase is used to manage the telomeres to manage the cell’s ability to die. Cancer is related to cells that don’t die. Autoimmune diseases can be caused by early cell death. Managing telomeres, therefore, has a broad and significant set of applications. The current focus is on hematological disorders, blood diseases. Geron has treatments in phase 2 and phase 3 clinical trials. Geron has been developing biotechnologies for decades and has yet to produce a commercially viable treatment. Most of the company’s technologies have been sold off to raise operating funds. This may be a classic dwindling of potential, or it may be the low point from which a strong recovery is begun.
MicroVision is a company based on a simple idea: an oscillating mirror tiny enough to fit on a chip. Reflecting incoming light can create a camera or a sensor. Reflecting beams of light can project an image. Being able to do so from a chip means sensors, cameras, and projectors can be made small, with small power requirements. Manufacturing a mirror on a chip has the fundamental advantage of not having to manufacture hundreds or thousands of miniature circuits for each pixel, as is true of most camera sensors and most projectors. The technology has progressed to commercialization, though not to the scale many anticipate – yet. The main products are projectors embedded in smartphones, and LiDAR sensors that may help auto autos see.
The potential is enormous and incredible (as in “in-” “credible” = “not” “believable”). Such is the nature of potentially disruptive technologies. For a glimpse at the upside, consider the cameras embedded in smartphones, tablets, laptops, and other devices. Add in sensors for the Internet of Things and autonomous vehicles, and the potential grows.
The potential may be enormous, but the execution has not met expectations. While revenues are increasing, they have yet to reach cash-flow positive and the company has been reluctant to provide estimates for profitability. A revenue estimate of $30M-$60M by the end of 2018 has not manifested and may be delayed.
Neophotonics builds and sells the kinds of optoelectric devices that make is easier to convert optical signals (like those in optical fibers) into electrical signals. The increasing demand for more bandwidth, faster upload and download rates, and greater connectivity suggest a growing market and industry. Until recently, Neophotonics was experiencing increasing revenue growth. A reversal led to the stock has dropping by almost 50%.
The good news is that my portfolio had more than enough potential. Even with dilution, it may yet help me re-retire; but it’s just going to have to work harder at it and benefit from overdue good luck.
Here are the links to the discussion boards I use. Feel free to comment here or there, and to pass along links to others. The bigger the discussion, the better the chance of valuable insights (as long as the trolls and flamers are moderated appropriately.)