From Best to Worst. There are typically two ways to make 100 to 1 on your money. 1. The preferred way–in my view because the company has more control of its destiny–would be to invest early in a high ROIC company that can redeploy capital at high rates for MANY years.
Note how the chart has gone sideways for 18 years as the ability to redeploy at high rates has declined. WMT can’t grow with regional economies of scale in Germany as it could in Arkansas back in 1965. You have to hold on through the inevitable 50% price plunges which you are able to do because of your understanding of the company’s competitive edge in the market.
2. Or, you find an extremely cheap, beaten-up cyclical company (TECK) in an industry that has had low capital investment, then hold on for the boom which you then sell out at the top–harder and more nerve-wracking than the example above.
The worst performing sectors are where you want to look, but realize that some industries like phone companies may be under structural change.
The Anthesis of Out-of-Favor
The Psychology of Sales
Hedge Fund Pop Quiz (Accounting)
Why is EBITDA so different than operating cash flow? Is that a problem or an opportunity. See: WTTR Mar 31 2018
There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. Paul Tudor Jones
I am selling about 1/5 to 1/6 of my speculative miners like Minco Silver. It was trading back in Jan. 2016 at about 30 cents.
This miner didn’t fit all my criteria like jurisdiction and top-flight management, but it had $1 per share in cash and short-term investments and $2.00 per share (basic shares outstanding) in book value with no debt. I viewed the stock as a cheap call option. My position was not a full position but diversified in these type of exploration/pre-development type of companies.
This bull market is starting to smell like the 1970 rally!
So, I expect this bull market to last perhaps years or for miners to multiply several times over. You make your money SITTING. But when you start feeling smart or, worse, other people think you are smart (where were you in 2015 when my accounts were down 35% to 40%?), it is time to peel some positions off. Sell into strength. Note the past history of the miners.