Semi Annual Exercise Mid 2018

Silly habits that we get ourselves into. They can be so hard to give up. Decades ago (was it really that long?), I started following Peter Lynch’s example by regularly seeing if I could describe each of my investments simply. The idea was that, if an investor can’t explain what and why they hold an investment, they should consider investing in something they understand. I set myself a schedule: every six months, write a synopsis of each company and include a simple assessment of their prospects. I was silly enough to do it on either June 30th or December 31st (I’d have to check my old files to establish the date). Now, my businesses and commitments layer that exercise on top of the end of the month, the end of the quarter, and the end of either the first or second half of the year. This time, it also included the end of the week. Silly, but I’ll continue to do so because the exercise benefits my financial fitness, even when it is somewhat painful.

Through all the ups and downs of the first half of 2018, the total portfolio value hasn’t changed much. That’s a sad accomplishment considering the record setting stock markets. But, that’s partly the plan. Missing the gains isn’t part of the plan, but not being tied to the “markets” is definitely part of the plan.

The markets are defined by the indicies, like the Dow, the S&P, and the NASDAQ. They are dominated by the mega-corporations, which are dominated by the major financiers and institutions. I don’t expect to compete against them as they shuffle between MSFT, CSCO, SBUX, and whatever at nanosecond speeds. I invest in small companies that have the potential to become big companies, diversify because some won’t make it, and sell the successes when they are in high demand and short supply as reflected in a high share price. Allow me to introduce you to three where that worked: MSFT, CSCO, and SBUX as well as several others.

The strategy worked so well, and I described it well enough, that several of my friends encouraged me to write a book about it; Dream. Invest. Live., which I did.

That strategy worked for decades until, as a few financial professionals have described it, I was hit by a perfect storm of bad luck; what I call My Triple Whammy.

Since then, my portfolio has languished with no indication of whether the lack of performance is from a fundamental change in the investment world, my perspective, or simply bad luck following good luck. Being the optimist, I look forward to the return of good luck. Being the realist, I realize something systemic like computerized trading, or mega-corporations hoarding profits in tax havens could have changed the way things work to the detriment of small businesses. Luck may also be playing a role.

My portfolio hasn’t recovered, yet I remain optimistic, though not as optimistic as previously. Small companies with small revenues frequently survive by diluting their stock. A decade or two ago, my holdings were sufficient for me to step up to a significant level. If I owned 0.1% of a company, one-thousandth of the company, and the company became worth a billion dollars, my holding would be worth a million dollars. Score! Retire. Dilution has erased that potential in all of my long term holdings. As of last year, my MVIS shares were worth 1/40th of their original ownership value. The same is true in other companies. The market cap potential persists, and may even be greater, but the number of shares is so much higher that the benefit to the individual shareholder is much lower.

I may not be as likely to retire on one phenomenal success, but if a few succeed, I can at least rest more easily and take more days off. There are mountains to climb!

(The following are synopses of the synopses. The longer synopses, a funny writing concept, are reached by links below.)

AMSC, which was called American Superconductor, hoped to do for electricity what fiber optics did for information. Their superconducting cables are finally available, but the sales haven’t arrived. The potential persists, but I can’t tell if the issue is the adoption of innovations in a conservative industry, or a management team that lacks the proper sales skills.

Asterias (AST) and Geron (GERN) have similar biotech stories. They’re both in mid-phase clinical trials, far enough along to be encouraging, but far from traditional FDA approval, and hence profits. They also both have that same issue of trying to spread the news without violating SEC and FDA rules, resulting in indecipherable press releases.

MicroVision (MVIS) has a technology that has the possibility of disrupting the technology industry the way smartphones did to laptops, which disrupted desktops, which disrupted mainframes. As I wrote in its synopsis, “The current projection is that profitability is possible in 2019, but for years the recurring theme has been that “really good news” will arrive in about six to nine months.” And, then there’s the continual dilution and a management team that has lost its credibility, at least for me.

Neophotonics (NPTN) sits in the critical industry that enables high, and higher speed internet speeds, something in high demand. I haven’t figured out how they can manage to languish as poorly as my portfolio, but maybe that’s a temporary situation for both.

The first half of 2018 has been weird enough that I don’t expect to correctly predict my portfolio’s performance in the second half of 2018. The markets don’t like turmoil, but they might like a more efficient energy infrastructure, treatments for cancers and damaged nerves, dramatically improved electronics, and appreciation for higher internet speeds. I can hope, which isn’t a strategy, but it is what I have to work with.

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.)

Investor Village

AMSC

AST

GERN

MVIS

NPTN

The Motley Fool

AMSC

GERN

MVIS

NPTN

Silicon Investor

AMSC

GERN

MVIS

Reddit

MVIS

 

About Tom Trimbath

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