Kores07, we've had a minor shirt front recently but that aside I'm impressed with your post here.
From what I understand, your point is the crux of the matter revolves around timing. People are making assertions as though the game is over. I'm an investor, I want 15% CAGR. I'm happy to hold indefinitely. Let's say for the sake of example that I need to cash in by 2020. My current average hold price is $0.85, in 2020 I need a share price of $1.49. That's right $1.49 in four years time, that equates to a 4.5 fold increase from today (ignoring future dividends).
An opposing view could be: what you are just looking for a price of $1.49 after all this risk? No, I expect a successful company achieving a multiple of far greater magnitude, nevertheless my target 15% pa beats the market by 7%.
So what?
None of us can predict which company will be the superstar but we can go with our conviction based on research and knowledge of the industry. I reject totally the notion that an investor (not trader) is wrong simply because the SP goes against them over 8 months. There are only two scenarios where the conviction changes and therefore decide to hold: (1) stating he obvious, going into Administration with liquidation imminent (2) capital structure changes to the extent the only likely beneficiary in future will be debt holders and as such unlikely to achieve the 15% CAGR.
Where an investor may struggle is if the size of original holding prevents accumulating at a lower level to bring down the average. That is, the plan should always be to enter in stages.
I'm reminded by one of those cheesy marketing emails we all get. Last week I received one reminding if Netflix meteoric but volatile rise. I can't recall precise numbers but it went something like could have lost 80% at its low point or if stuck with it gained 2000% yes that is a 200 bagger. Illustrative of course and no relevance to Slater other than illustrate what can happen in the market.
Yes but Slater is stuffed are you blind, I hear you say. May be it is stuffed but that is no more or less speculative than saying it will be $1.49 in 2020. For every argument supporting it is a dead duck there is an opposing argument. Cutting out all the noise and looking at it simply: is there a buck to be made in the industry? Does anyone realisticly expect a lawyer to study hard at law school build a practice and then live on a pauper Salary? Because that is what is implied. If say Slater do not have a viable business due to the insurance sector/government attitude then neither does any law practice. Net result, the community is left without legal represention due to the profession cannot earn a return on capital (whether private if public). Would a government allow such a dysfunctional state of affairs to develop? Of course not, anarchy is the next step. So a robust judiciary is essential in modern society and that requires efficient, competent lawyers plying their profession delivering results for clients, lawyers and a return to providers of capital fueling the system. In other words scale - efficient fee earners able to reduce cost per case through 100% utilisation of back office administration.
Back to the point. I do not accept it is correct to say an investor is wrong simply because 8 months into a lifetime decision the market values the company considerably less . Wrong cannot be determined before there is a definite outcome proving the investment objective is unachievable (e.g 15% CAGR in perpetuity).
I can hear readers say are you crazy, you could have sold at $2.70 and bought back today with the obvious price advantage. Herein lies the trader illusion, it is always obvious after the event. It is extremely difficult if not impossible to earn big gains say 100%pa consistently. There is no requirement to understand the market at all to appreciate that comment. Bearing in mind we all compete with each other profesional and novice - and for every buyer there is a seller then it stands to reason overall the population cannot grow greater than the average which is typically 8% pa. It is possible to do better of course but incredibly difficult and the gambler confidence deception can quickly kick in where a run of success creates over-confidence and then inevitably regress to the mean, 8% through a series of bad decisions. That has to occur so the opposite to the trade can have a reasonable chance of achieving their 8% over a lifetime.
In my opinion there are only two ways to earn a return. One is stick to your conviction and look ahead 7 years or more, and two trade micro timeframes (day) , where direction is fairly predictable in the intraday action earning a slim marginal profit. I'm certain those who have picked the swings in Slater will disagree and point to huge profits. It is impossible to challenge in a short term, if I was to use my Tardis it would be interesting to see what that same swing traders performance is over 7 years!
The Doc hasn't lost anything yet, and is unlikely too when the till is shut in approx. 10 years time. As for the mythical mighty, who knows?
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