Hi
@madamswer,
Once again, I would like to thank you for being so open and generous with sharing your thinking. I am very fortunate to be one of the many beneficiaries of it.
You have showered me with praise that I have not yet earned and don't deserve, but I am very encouraged by it. I can only hope to develop the kind of capacities you have built for succinctly sizing up investments, digesting news about your companies, and articulating your thoughts so clearly.
Investing is indeed a lifelong course, and it does serve up some very expensive lessons from time to time. I have had my share of these too.
Speculating on resources
From day one, I have almost subconsciously avoided this sector even if I have eyed some investments from time to time. The narrative is familiar - they are highly cyclical, capital intensive, price takers and have a history of poor returns. They won't pass the sleep at night test.
Of course, I have missed my fair share of winning picks because of this tendency - if I had followed through on AJM @ 4c and BHP @ $14 not too long ago, my portfolio would have been far better for it.
Announcement arbitrage
For the first six to twelve months of my investing career, I made highly speculative bets on companies, usually after severe price falls, in the expectation that subsequent newsflow would re-rate the shares.
Related to this, I used to attempt to "quick flip" shares that looked highly oversold without any regard to fundamentals.
I had some early successes (featuring a rogue's gallery of un-investable tickers like SGH, SRF, SHJ, AYS), and a couple of blowouts (CAJ comes to mind, though the parcel I hold now is well in profit).
I soon realised that this wasn't a sustainable way to build lasting wealth, and was actually a stressful experience that required constantly monitoring price action and other newsworthy developments. Investing is fraught enough as it is without having to constantly watch over your holdings.
Investing for yield
I could't agree more with what you have said.
It is the reason why I held on to companies like RFG and TGA for far longer than I should have. I was happy to collect the cheque and ride out the swings and roundabouts in the share price - until the cheques got smaller and/or vanished altogether.
I now prioritize the quality of earnings and the sustainability (and growth potential) of the dividend highly in deciding to buy shares for yield and don't simply settle for a high trailing yield.
The HotCopper influence
Initially, participating in this community led me down to the path of investing in highly speculative "concept/story" names with no earnings to back them. I was sucked into a number of names that were rallying on hype alone, cheered on by their many backers on these boards (they often have the capacity to turn into a virtual lynch mob if you swim against the tide!).
I still hold my triumvirate of shame (AJX, RFN and ZIP) from those days, largely because I do not yet need the tax loss! Apart from the obvious reasons for avoiding these names, I also learned that my mentality is the anti-thesis of "momentum" investing. I could have sold my positions in these companies while I was well ahead, but my inherent buy-and-hold bias meant I rode them all the way to the ground.
I now know how to use this community to my benefit, and the pitfalls to avoid.
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I called my portfolio lopsided because it has a heavy concentration to small to mid cap names, with a few on the more speculative end of the spectrum.
Most well constructed portfolios have a base consisting of large, well established "blue chip" tickers that hum along in an unspectacular fashion while throwing off a good income stream. While I would like to add more of such companies, I find a lot of the traditionally favoured names at this end facing multiple challenging headwinds, both structural and cyclical.
As someone with the vast majority of my useful investing life ahead of me, I also tend to skew my allocation towards companies that have superior growth prospects, which also pushes my portfolio up the risk curve.
I have a number of targets that I would like to add to my portfolio (especially in the technology sector), but almost all of them are trading on patently ridiculous valuations and have been for quite some time. I own a few that are richly valued too, but I managed to buy back when they are much smaller in size which affords me a large margin of safety to ride out the ensuing volatility.
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Back to RHC now, briefly - the hardest part of investing for me is the waiting (both before buying and after).
I thought I did well to buy where I did after patiently following the company for practically all of my investing career, only to see it significantly below that level just a few days later. I had initially planned to make a first purchase around these price levels, but decided in the end that stumping up a few % extra was worth it for a high quality name like this. Such are the vagaries of this lark - it is the ticket to the dance.
I suspect that in the fullness of time, these levels will be seen as an attractive entry point.
(20min delay)