Semi Annual Exercise EOY 2018

From me (slightly edited from previous posts);

“Decades ago (was it really that long?), I started following Peter Lynch’s example by regularly seeing if I could describe each of my investments simply. The idea was that, if an investor can’t explain why they hold an investment, they should consider investing in something they understand. I set myself a schedule: every six months, write a synopsis of each company and include a simple assessment of their prospects.”

The fact that the quote is slightly edited is a good example of maintaining any exercise: persist, but alter as appropriate. Someone in their sixties shouldn’t exercise as if they were forty, or twenty, or newly born. Change is how writing and investing mature, too.

From six months ago;

“The first half of 2018 has been weird enough that I don’t expect to correctly predict my portfolio’s performance in the second half of 2018. The markets don’t like turmoil, but they might like a more efficient energy infrastructure, treatments for cancers and damaged nerves, dramatically improved electronics, and appreciation for higher internet speeds. I can hope, which isn’t a strategy, but it is what I have to work with.”

If this was a speaking event I’d have fun asking for a show of hands of how many predicted anything about the second half of 2018 from the first half. Even astronomers and climatologists would be surprised. Economists probably didn’t expect Bitcoin to crash while also becoming a popular currency in some countries, oil to retreat to below $50 a barrel, the Dow to almost hit 27,000 and drop below 22,000, and the US government to end the year dealing with a shut down.

One of my stocks doubled, but only after it dropped significantly (AMSC). The rest were a mix of no news or speculation, ephemeral foundations under volatility that continues to quiver without warning.

One stock, AST, followed GigOptix’s example by being bought out after reporting good news. The irony is that both it and the acquiring company (BTX, which already owned a large portion of AST) then fell.

My strategy that served me well for decades hasn’t done so since My Triple Whammy, a perfect storm of bad luck that may have heralded a new era. SEC controls seem less enforced. Short sellers and automated trades seem to control the market. Individuals may be less in control, which may explain at least part of my performance. Or, and an honest introspection requires considering this, I was merely luck for thirty years. You may well imagine why I had confidence and then had it challenged. That strategy is described better in my book, Dream. Invest. Live.; but basically it is a combination of Long Term Buy and Hold (LBTH) and buy small, potentially positively disruptive companies when they are laughed at or ignored and sell them when they’re recognized as the next big thing. Some of that potential remains with each of the stocks in my portfolio, but none of them have succeeded commercially in the last six months.

And yet, I continue the exercise. Something I noticed when I wrote my book on personal finance and investing was that it was easy to hear from the authors who continued to have success, even if it may be attributable to luck. It is less common to hear from the ones who didn’t succeed, even it if may be attributable to luck.

The persistent question is whether doing the same thing and expecting a change is a sign of a bad choice, or the sign of the perseverance that is required of entrepreneurs, innovators, and pioneers.

In my case, there isn’t much of a choice. I maintain confidence in my philosophy and strategy even as I have diminished confidence in my invested companies. Until I begin earning discretionary income, the choice is moot. I probably won’t invest much more until I can fulfill the first of my frugal finance rules; “Spend less than you make.” then invest the rest. That potential is near, but not here, yet.

Within the next six months I won’t be surprised to hear good news from:

Asterias (under its new ownership of BTX) as their treatment for damaged nerves progresses,
Geron as it makes progress through its cancer treatments.
MicroVision because CES 2019 is near and management guided towards cash flow positive or profitability sometime this year.

I don’t expect startling news from AMSC or NPTN because their technologies have already been developed and introduced to the market, and both are selling to commercial, not retail, customers that are more likely to grow without press releases or customer testimonials.

The economy has its issues, too. Whatever happens with my holdings happens as the weird worlds of politics and financing mix in unexpected ways. I think my best hope, besides winning the lottery jackpot, is to take advantage of distressed and uncertain markets to buy low and sell high. Stay tuned to see what happens.

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.)

Investor Village

The Motley Fool

Silicon Investor