I started reading a new book this week, The Intelligent Investor by Benjamin Graham.
Warren Buffett calls it hands down the best book he’s ever read on value investing and he considered Graham his mentor.
It’s a beast of a book – over 600 pages including the endnotes and appendices!
I am a little concerned that I may not finish it before the next Ice Age but I’m even more concerned that I’ll run out of highlighter pens.
Graham had a set of five core principles about investing that are just as valid today as they were back in his day.
Three are really resonating with me…
1. A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.
2. The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists.
3. The secret to your financial success is within yourself. If you become a critical thinker who takes no Wall Street “fact” on faith, and you invest with patient confidence, you can take steady advantage of even the worst bear markets. By developing your discipline and courage, you can refuse to let other people’s mood swings govern your financial destiny. In the end, how your investments behave is much less important than how you behave.
Patient Confidence is my new mantra!
It’s applicable to us because I am in a couple of markets with HUGE volatility – cryptos and cannabis – and both of these markets have experienced unsustainable optimism AND unjustified pessimism in just the last two weeks.
Staying the course and maintaining confidence in a company’s stock is a test of patience.
I’ve been investing a long time and occasionally I’ve exited trades much too soon because I lost confidence – losing out on lots of profits as a result.
I’ve also stayed in too long sometimes, not realizing profits when they were there for the taking.
A great recent example is Kush Bottles (OTC: KSHB) a company we hold in the CannaVestor Lab portfolio.
I first bought KSHB on November 15, 2016 at $3.96 a share. It didn’t do what I expected it to do and, even though I knew this company would perform well, I chickened out and sold it on May 15, 2017 when it dropped to $2.55 a share.
But I kept thinking about it.
And researching it.
And even as it kept going down I just knew that it would turn around at some point.
So I bought back in at $1.91 a share on October 16, 2017 and the stock is trading today at $6.20 a share – up 225%.
In that trade, even though I lost confidence in my ability to cope with a “loss”, I never lost confidence in the company.
I practiced patient confidence in that scenario and was rewarded.
So, patience and confidence are two things I work on a lot.
What about you?