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Week 394: New Years Resolutions

Portfolio Performance

Thoughts and Review

Here are a few investment resolutions for the new year:

  1. After a stock has a good run, I will sell a decent amount of it, no matter how much I like it.
  2. I’ll stay away from illiquid stocks that will be hard to get out of in a bad market
  3. I will stay away from stocks with high levels of debt
  4. I will be very thoughtful before purchasing any stock not generating free cash flow
  5. Be selective
  6. Post more!

These resolutions could also be described as Lane Sigurd’s investment strategy for a bear market.

Some of them are at odds to how I have invested over the long bull market we’ve been in.  Over that time I held my winners and watched them turn into two, three or five baggers.  I didn’t worry about debt.  In fact I coveted levered stocks that would really run if the tide turned.  I didn’t give a second thought to liquidity because I was always able to get out.

I think we are still in a bear market.  Maybe we’ll top out soon, maybe we’ll run back up near the highs, I don’t know.  But I am positioning myself based on the expectation that in the next few months there will be another leg down.

Having said that, there is a bit of good news.  The Weekly Leading Index looks like it might be putting in a bottom.

Is it possible this is just another 2016-like blip?  Possibly but I’m still going with the bear market view.  Maybe I’ll have to change my mind on it.  But not yet.

Looking back, December was a tough month, but I had a lot of cash and that helped cushion the blow.  And while I was not lucky enough to go all in at the bottom I did pick at a few positions in December, and the positions I held onto had big runs in January.  So I sit here now at (somewhat shockingly) new portfolio highs.

I’m a bit surprised by that.  My portfolio still has some 70% cash after all.  The market still isn’t great.  It’s really just a bit of luck and timing really.  A number of my remaining positions had big runs.  Liqtech took off.  Gran Colombia took off. Vicor, Golden Star and Wesdome all had nice moves.  UQM Technologies got taken over.  I bottom fed on a few small positions (Identiv, UQM and a few oil names) that all had really nice bounces off the bottom.  Meanwhile I went a few weeks where none of my positions went down.

Having had good performance while not owning very many stocks makes me think that in this market I would be better off being selective than to go with my more usual shot-gun like approach.   In the past I’ve taken small positions in a bunch of stocks, even if I wasn’t completely sold on them all, and watched whether they would develop.  A few would become big winners and I’d add to those as they went up.

I’m not going to do that in this market.  Instead I’ll hold cash and wait for stocks that I have a lot of conviction with.  We’ll see how it works.

So it was a pretty good month.  But I am not overstaying my welcome.

True to my first resolution, I have been selling my winners.  I sold out of three of my trades entirely already (Identiv, Tetra Technologies and Lone Star).  I reduced my Liqtech position by half.  I reduced Gran Colombia and Vicor as well.

I sold some losers too.  I got rid of Roxgold, Gear Energy and reduced my position in Empire Industries.

One stock I’m not selling is Wesdome.  As much as I love my other gold names, the more I dig into what Wesdome is onto at Kiena, the more I love it the best.  It’s not cheap I know, but its got so much going for it.  It’s in Canada and not in an area with questionable politics.  There are two mines with great potential for expansion.  But what I really love about the story is just how cheap the growth from Kiena will come for.  Something I had overlooked in the past were comments by Wesdome management that the mill at Kiena is worth $100 million.  That is basically a $100 million asset that was useless that is now an integral piece of their development plans.  That they can bring Kiena on-stream (and I’m seeing estimates from anywhere between 90,000 oz to 130,000 oz from brokerage for the project) for $50 million is about the most efficient gold development project I’ve seen.

As for my last resolution, I have been lax about posting.  It’s harder to post in a bear market.  Even when I get up the courage to buy a stock, I have weak conviction because of the market.  I find that it takes a lot of conviction to write about something because mentally it kind of ties you to the idea.  That makes me reluctant to lay out a thesis when I might get scared and sell a week or two later.  Or worse, I might hold it because I wrote about when I really should be selling.

UQM Technologies is a good example.  I bought it in November, sold it, then bought it again in December.  I didn’t write about it either time, even though it was a great story.  I was just worried the market might keep falling and I would be doing another round of selling if it did. UQM would be a stock I would cut.  Fortunately the market turned around and I didn’t.

I’ll try to put aside those fears in the new year and write about my positions more.  Even if I look at all of them right now as having the time frame of a pin-pulled hand grenade.

Portfolio Composition

Click here for the last seven weeks of trades.

 

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7 Comments Post a comment
  1. Temur Perkins #

    Nice trades on TTI, good job.

    Your “last seven weeks of trades” shows a GXE buy but no sell, what did you pay for it and sell it for? When did you buy and sell it? If we sanction VZ the WCS differential may continue in it’s current anomalous state of being smaller than the cost of shipping it to the USA by rail. It is currently selling at a premium to WTI net of rail cost.

    January 26, 2019
    • Thanks, I didn’t realize I had forgotten to sell it in the practice portfolio. I’ll have to do that Monday. In my actual portfolio I sold half of it December 17th for 58c. Then the rest I sold a couple weeks ago for 64c. In the practice portfolio I bought it for 64c.

      I hear you that WCS is trading very well and that looks good for GXE. My selling is really just that I didn’t feel comfortable owning so many energy stocks. I already have ATU, at the time I still had TTI, LONE (though I see I didn’t put that one in the practice portfolio so that was a mistake), CET, SDPI, BRMR (natgas) and one more I don’t have in the practice portfolio called ESOA. So it was a lot of energy especially for a market that I don’t really trust. That was really my main reason.

      January 26, 2019
      • arf #

        You like Peyto at these prices? Low cost player, manageable debt trading at discount to book and low PE. Matter of waiting it out a couple years it seems to me.

        January 26, 2019
      • I haven’t looked closely, maybe its worth me digging into. The problem here has to be takeaway and whether there will ever be takeaway for Alberta gas. What have you read about the LNG facilities? You think more than LNG Canada will get built?

        January 29, 2019
      • arf #

        I would think the market balances at some point? The PE is so low (assuming prices normalize somewhat) plus they are one of the lower cost producers, so if they don’t make a profit, everyone else is burning up.

        February 4, 2019
  2. Brent Barber #

    Nice trading – not many people already back to new portfolio highs.

    Gold Stocks and now physical gold seems like they may have bottomed and may be starting another bull market. Really don’t see how the US government gets out of their high debt situations without devaluing their currency via inflation, which almost surely will push up gold prices.

    Not sure if it really is time for this trade yet, but been some good trading the last several month. Plus, industry consolidation helps control supply, and we may be in a Don Coxe “those who know it best, love it least, because they have been hurt the most” situation with companies like Goldcorp, a traditional market leader selling out.

    We’ll see, but keeping a close eye on gold for sure.

    January 27, 2019
    • Thanks, so honestly I think this move in my portfolio is a bit of luck. I sold a lot and only held about 20% stocks through most of December. I got lucky timing a few purchases and then got lucky b/c the few stocks I kept all ran at the same time. I mean to get 50% runs from your 2 biggest positions in less than a month is kinda crazy.

      As for gold stocks, like I wrote back in July or August or whenever, I wasn’t really buying gold stocks because I had a ton of conviction in gold. Its just that they are so cheap. Some of these stocks are at way less than 10x fcf and back in the summer finding any stock under 10x fcf was tough.

      January 29, 2019

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