Wednesday, December 11, 2013

250 posts and counting, lessons learned

I recently crossed the 250 posts threshold, and while an arbitrary number I felt a small bit of introspection on the last three years of writing this blog might be warranted.  Many writers will start a blog with a post detailing their goals for the blog and why they blog.  I've never done such a thing, and I'm not sure it matters.  My goals for this blog are not your goals, if we have different goals but you still enjoy reading then I'd say I've been successful.  But to be honest I never stated my goals because I never had any.  I like to start things and see where they go instead of starting a project with a finish in mind.  For now I'm just riding the wave of Oddball Stocks, we'll see where it takes me.

1. Writing improves thinking

Arguably the biggest gain I've had from writing this blog has been that forcing myself to write out my thoughts and investment ideas has improved my thinking.  Writing clarifies thinking, often we think ideas are clear in our mind, yet when we try to explain them they're a jumbled mess.  Many times I will uncover something I need to research further, or realize information might be more or less valuable than initially thought when I'm putting my blog pieces together.

Beware though, we are our own worst critics.  I still feel like my English grammar hasn't progressed beyond 9th grade, which is incidentally when I had to take a grammar remediation class.  I appreciate everyone trudging through what I write even when it might not be as clear as possible.  Maybe once the blog generates more than zero in revenue I will work on hiring an editor.

2. Assumptions are often flawed, a margin of safety is key

One advantage of writing everything down is it can be reviewed later.  It's amazing to see how many things I thought would happen in the future never came to pass.  Likewise it's incredible the number of investment surprises that I've experienced as well, both good and bad.

When we make assumptions it's easy to forget ones that don't work and remember ones that do.  By having everything recorded we preserve a record of our decision making that can be reviewed and studied later.

When reviewing my past investments and write-ups on the blog the concept of margin of safety has been re-enforced.  No one knows the future, if we buy a security at a large enough discount we in theory are protected against a multitude of bad surprises, and are opening ourselves to the potential for a good surprise.

3. There are no points for ideological purity

Since writing this blog I've come across a number of investing purists, maybe something isn't 'value' enough, or it isn't something Buffett would ever buy.  These investors are attached to a dogma, they invest with that dogma and are zealous about protecting the dogma.

I have no investing dogma, and most of the successful investors I've met don't either.  I'm not even sure Buffett has one, if he can turn a dime it seems he's a willing participant.  At the end of the year I want my portfolio's value to be greater than at the start of the year.  If I had to invest in net-nets, or low P/B stocks, or cash boxes, or whatever to get there it doesn't matter as long as the goal is hit and my risk is kept in check.

Investors aren't rewarded based on what school of investing they follow, they're rewarded when they buy something mis-priced, whether it's growth, or assets, or cash flow, or exotic artwork.

4. You are not the first to ever find an idea, no matter how obscure

I don't agree that a justification for a low valuation is that a stock is undiscovered.  There are always others who are aware of any potential investment either at the same time as you, or before you.  This might sound strange coming from someone who digs up what seem like many original ideas.  But I've found that in almost all investments, no matter how obscure I end up connecting with a number of readers who already knew of the company, or were aware of the situation.

The comments you see on this blog are a small snapshot of the correspondence I have with readers.  I probably have a 20:1 ratio of emails to comments, for each comment you see on this blog I have about 20 emails discussing various investments or asking questions.  I've found that there are passionate followers of even the most obscure stocks I have dug up.  It turns out the more obscure and strange something is the more responses I get in private about the company.

Given a function of how many global investors exist, the inter-connected nature of the Internet, and how easy it is to communicate and find ideas I don't think there are many hidden markets left in the world.  On the other hand there are plenty of ideas hiding in plain sight.

5. Some stocks are fun to write about, but not necessarily good investments 

This is the hardest lesson that I've learned on the blog, many stocks which are a challenge to unravel, and generate heated discussions aren't necessarily great investments.  Sometimes the best investment is a simple one like PD-Rx, or REO Plastics.  These companies were straightforward at the time of investment, undervalued assets with earnings.  But there isn't much to write about for a company like that.  Whereas some of the most interesting and complicated investments don't offer as attractive of a return.

It's difficult writing to find a balance between posts readers might enjoy, and posts that provide potential profitable investments.  I clearly enjoy unravelling a good mystery, but if I filled my portfolio with mystery stocks I would probably have sub-par returns.

I've purchased a number of small companies where an hour of research is all I need to make an extremely educated investment.  That includes reading all of the news and multiple years worth of annual reports.  These simple companies also have generated substantial returns for my portfolio as well.

In the past year I've tried to increase the mix of topics I post about, great ideas, ideas I passed on, general investment thoughts, and investment mysteries.  With a greater mix it's harder to get stuck on one topic for too long, which hopefully lessons any potential for boredom from reading the site.

Final thoughts

I've enjoyed writing this blog, it's helped me develop as an investor, helped me meet many great people, and hopefully made a little money for many readers.  Here's to the next 250 posts!

16 comments:

  1. Great blog! I am looking forward to the next 250 posts.

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  2. Thanks for a fantastic blog Nate! I have followed you for some years now and have printed out all your posts and went through it post for post, learned a lot from you. Really looking forward to the next 250 posts!

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  3. Hi Nate

    Really enjoyed your post. Totally agree that writing improves thinking. When initially I started blogging, I thought its unnecessary wastage of time. But now I write posts on topics with an intention to understand that topic in more depth.

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  4. You are doing a great job, Nate. Thank you.

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  5. Congrats on hitting the 250 post milestone, keep up the good work! Your blog certainly made me some money :)

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  6. Nice job Nate! Keep up the good work...

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  7. Congratulations on the milestone, and thank for all the time you have spent putting this blog together. I certainly hope that there will be an entry some time in the future that details what you've learned over 500 posts.

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  8. You forgot about discipline. The fact that you've made it to 250 posts shows you have discipline. A lot of people don't win anything in life because they never show up to the race. Most of the rest don't make it to the finish line because they give up halfway through. You showed up and you have kept on chugging. I think your discipline is a lesson for us all. You're a winner in my book!

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  9. Congrats on the Milestone, Nate!

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  10. This is my favorite investing blog, or maybe tied for 1st with otcadventures. Keep up the good work.

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  11. Congrats Nate. Keep up the great work!!

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  12. Cheers to the next 250 posts! Keep up the amazing work!

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  13. While nothing may be original it doesn't hurt to have it laid out and lately it seems like your writing has been moving some prices which is an indication that while some people may have studied it, there is a wider universe that respects your thoughts and in interested in buying some of the companies you recommend. So that would be another learning in my opinion. Not that you're here to move markets but that is a heck of a kicker to the items you noted above

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  14. Great post about writing. Really hit the nail on the head in terms of reasons why I think a lot of investors have started writing blogs. Margin of safety goes a long way in not being precise, but helping you still be right in the end. Congrats on the length of commitment to your blog.

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  15. Congrats Nate! Glad you keep up with it.

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