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19/01/24

11:37

Post #: 71960914
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Originally posted by verce ↑

Once you find what you think is a good company which is significantly undervalued, the hard part is patiently holding for months at a time and doing absolutely nothing. If you don't have the patience and temperament, this will end in disaster.

I personally find if I concentrate on just one stock, I can develop my own conviction to get me through these periods of uncertainty.

I've found this strategy of intense concentration (the opposite of conventional diversification) helps me develop the confidence to 'bet against the herd' so to speak, and invest in those companies that 99.99% of the market has strayed away from for one reason or another.

It could be a disappointing IPO, delays, or just plain bad news which leads to disgruntled shareholders and subsequently sends a company's share price into the doldrums. These doldrums are my opportunities. I can't figure out a way to reliably generate outsized returns in the ASX200 (price discovery has already occurred), but in the microcap segment of the market, there is a lot of opportunities to find huge upside potential and turn-around stories.

I like tiny companies that are totally ignored and sometimes severely punished by the market, but they need to have a tight capital structure (definitely not billions of shares on issue), well-incentivised management with skin in the game, and preferably some good macro tailwinds behind them (like the AI trend at the moment).

Then you have to sit and wait patiently. If something is priced for failure, things just have to turn out to be 'merely okay' for a re-rate to occur. Liquidity is not an issue, because if you are on to something good, liquidity will arrive in the future as a stock gets discovered by institutions.

This is how I found NUH & TNY back in the day. But I've had many losers as well. You just have to hope that the winners make up for all the missteps.

Just my $0.02 (TNY took nearly 12 months from my initial purchase around 20 cents to reach a high of $3 or so)

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Bit like where SWM was a few years ago at $0.09 has been up into the $0.80's but now floating around $0.25
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Short Term Trading Week Starting: 15 Jan, page-51

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Short Term Trading Week Starting: 15 Jan, page-51

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