Semi Annual Exercise EOY 2013

Back by popular demand, but mostly because I do this anyway, it’s my semi-annual review of my stocks. For over a decade I’ve ended every June and December with a simple exercise: in a few sentences, well, maybe a few paragraphs, explain the company behind the stock, why I have the stock, what I think the company can do, and how I think things are going. It is an exercise inspired by Peter Lynch (author of One Up On Wall Street). If you can’t explain why you’ve got it, maybe you shouldn’t own it. I suspect that is true of any possession – though that would make a tough requirement for any first-time home buyer. Welcome to my opinions, lightly supported with facts, that explain to me, why I own what I own and what I may do differently.

A quick description of my strategy, analyses, and attitude is back in my previous Exercise. The shorthand is LTBH, PV of FR x %risk, and Buy Small Sell Large. Otherwise known as Long Term Buy and Hold (typically for years), Present Value of Future Revenue Discounted for Risk, and Buy stock in Small companies and Sell them when they are large. Want a longer discussion? Book me as a speaker, hire me as a consultant, buy my book (Dream. Invest. Live.), Dream. Invest. Live. or maybe just buy me a very good lunch. Despite considerable consideration, decades of experience, patience, and diversification and a short while as a millionaire, my current finances are poor enough that I’m surprised I didn’t qualify for Washington’s subsidized health care.

Amongst a whispered chorus of “I Told You So”, I simultaneously feel dismay and enthusiasm. I feel both emotions because I’ve been investing for almost 40 years. Stocks go up and down and seeking logic to describe their motions is usually an exercise in rationalization, not methodical explanation. If you read the synopses (which are available below via links to other discussion boards, where the conversations serve more than just my web traffic) you’ll probably see that pessimism and optimism mixed.

For my optimism, I needed no more confirmation that what I wrote back at the end of June.

I am heartened.

My portfolio possibilities can far exceed any financial influences of mortgage modifications.

  • Currently, my portfolio is enough to pay off my credit card debt, but would leave only a few thousand for emergence funds and my retirement account.
  • If all of the stocks reached P/S = 6 at current revenues and products, I’d have enough to catch up on the mortgage and even pay off the credit card debt. This is close to what I consider a conservative rational market valuation. It assumes no growth.
  • The same is true if two of the disruptive stocks, MVIS and GERN, reached market caps of $1B. Then, I’d also have enough for a few more years of living expenses.
  • If they all reached market caps of $1B, I’d have enough, that if necessary, I could pay off all of my debt and still have savings. This is reasonable if the market was valuing companies and stocks based on the present value of future revenues, which does not seem to be happening for such small companies – though that may be changing.
  • As I said, valuing disruptive companies is difficult. While my estimates for MVIS are in the incredibly modest range of $640 (only $80 pre-split for you knowledgeable in MVIS), others estimate as high as $1,500. At that price my portfolio is so much greater than enough that philanthropy can become a wonderful occupation.
  • If GERN matches MVIS’s success, well, it will be time to give away lots of money.

So goes the money story. Of the list, only one scenario leaves me with my current worries. I considered such a scenario to be unbelievably unlikely, yet here it sits.

I am also disheartened.

I wrote that only one scenario left me with my current (June 2013) worries, and that it was unlikely, yet that is where my portfolio remains. Luckily, my consulting and non-profit support business is doing much better.

And yet I am heartened.

The companies are making progress, and so are some of the stocks. AMSC is up almost six-fold. GERN has tripled. RSOL has almost doubled. Unfortunately, I had to sell half of my GERN just before it surged again. As encouraging as that sounds, on balance with my other stocks, GIG and MVIS, my portfolio has not appreciated enough to return my finances to anything that suggests taking more time off. Seven days a week remains my work schedule.

AMSC proceeds with its products and its court case. Geron’s clinical trial data is encouraging, especially the part about returning bone marrow to a healthy state. GigOptix’s highest end products should be gaining traction in the market, and the stock is about one-fourth of my conservative estimate. MicroVision really could be very close to delivering on its potentially, really, really, anytime now, right? Real Goods Solar trudges along, my most conservative holding, and yet its competitor has multiples that are more than 30 times higher. There is room for dramatic improvements in each of those stocks.

As I’ve said before, the likelihood that they will all succeed is small; as is the likelihood that they will all fail. And yet, in the meantime, there they sit.

Investing is based on logic, data, and judgment. The results include luck even though we never like to acknowledge luck’s role. The only way my money can make money is for me to invest it, and to invest responsibly means regular care and attention even when things are a bit achy and don’t seem to want to move. Patience and exercise, because, well, they don’t cost much and can have impressive consequences when given enough time.

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.) Congratulations to those who are using the same exercise. I hope it is working for you too.

Investor Village
AMSC
GERN
GIG
MVIS
RSOL

The Motley Fool
AMSC
GERN
MVIS
RSOL
Economy and Markets

Silicon Investor
AMSC
GERN
GIG
MVIS

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About Tom Trimbath (trimbathcreative)

consultant / entrepreneur / writer / photographer / speaker / aerospace engineer / semi-semi-retired More info at: http://trimbathcreative.wordpress.com/about/ and at my amazon author page: http://www.amazon.com/-/e/B0035XVXAA
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