In my last blog post I wrote a little bit about my stock picking journey and how an early investment in Trakm8 was life changing, and how Avesco put the icing on the cake. It's not meant as a boastful post, but I'm hoping it provides comfort to some novices as we currently endure a bear market in the small cap. sector.
I should re-iterate that bear markets are opportunities. "Be greedy when others are fearful". In Trakm8's case we might actually live the phenomenal share price appreciation again and then some more?
I previously mentioned that I started to invest seriously in the 2000's. What do I mean by that? Well to summarise, if you can't read a balance sheet, don't know what a p/e ratio is or TNAV or dividend yield etc then you should probably stick your money in a tracker fund. I'm not patronising, but you do need to (at least) find out about the basic financial measures to avoid many of the pitfalls. I also advise, as I did before, to read extensively about the "Great Investors" and their investing ideas. I did all those things before getting heavily involved in stock picking.
Anyway I digress. Why did I become a long term investor rather than a trader? Personal experience basically. Before my success with Trakm8 and Avesco, in 2002 I had invested in a company called Ashtead and a shipping company called Clarkson.
Starting with Ashtead. I bought my first tranche of shares in Ashtead for about 34p. At the time, I remember thinking that they were easily supported by NAV. Slightly naively perhaps, I hadn't taken into consideration their huge debt pile. I'm a little more clued up these days hopefully! Ashtead got into trouble and the share price fell to around 2p. "Oh dear, how sad for me" are words I didn't use at the time, my language was a little more colourful I seem to remember.
Anyway, I just held on and hoped for the best. Disaster was averted, and slowly but surely the share price began to rise. I bought more at 15p to average down, and let out a sigh of relief when I sold for a small 7% profit. Phew! Dodged a bullet there?
Have a look at the chart from 2002 to now. It's certainly not been a straight line journey, they never are, but even in today's market the share price stands at £17.12. My first purchase would have been a 50 bagger, and my second purchase a 115 bagger. Oops! Hang on, did I mention they also restored a dividend payment? They've paid out £1.39 in dividends since 2002. In fact last year's dividend alone would have given me nearly half my money back without selling a single share.
Clarkson is a slightly different story, but a similar theme. I bought Clarkson in 2002 for £2 a share. It was debt free and paid a 7% dividend yield. Pretty safe stuff I thought. I then watched the share price drop to £1.30 or so. Let's just fast forward shall we. I eventually sold mine for a handsome 74% profit. Not so handsome sadly! Today's share price is £23.65. The dividends paid out since 2002 amount to £7.30. So that would have been 3.65 times my money back in dividends alone, and a 12-bagger.
Now don't get me wrong, not everything you buy will become a multi-bagger and if you're a speculator i.e. having a punt on early stage oil or mining companies or low/non-revenue multi-million pound "story" stocks then prepare for lots of disappointment or even total wipeout. However, if you grasp "value" investing or GARP stocks or preferably companies exhibiting both characteristics then the chances are that in a portfolio of 10-15 companies (at least) 2 or more should prove to be multi-multi baggers in the long term, and eventually you won't really care what happens to the ones that don't. I might add that in the past 18 years, only one company has ever gone bust on me and that was a speculation.
I don't do advice or share tips, but this current market will throw up some absolutely fantastic buying opportunities if you've got the cash and if you're fully invested already then maybe switch off your monitor and do something else for a while.
ATB.
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