1 question to reflect on
The result of last week's question: You do not need a lot of time to take action! I’ve changed my process. If after a couple of hours, an investment ‘feels good’, I will take an initial position to get my toes wet. The more I research and the more the company executes, it can be built up into a full position.
This week’s question:
It may not be easy to admit. Especially if you’re active on social media, and literally everybody seems to be a stock market genius. Maybe the question is too severe, and I should have asked if you manage to beat the index every year.
2 quotes, do you agree?
“Success is not final, failure is not final: it is the courage to continue that counts”
Winston Churchill
Although it’s easier to muster through when you’ve had success. 😉 The problem is our human brain, which loves to look for causation. However, the mistake we make is linking the outcome of a decision to the quality of decision-making. I wrote about it a while back:
It’s one of the reasons why I apply a yin-yang strategy. If you invest in compounders, it may take many years before you can say if the outcome resulted from a great decision you made. When investing in microcaps or even special situations, that time frame shortens. The results should show itself rather quickly.
I never lose, I either win or learn
Nelson Mandela
Over the last decade of investing, I have lost, and I will share my losses in all transparency. Here’s some of my mistakes of 2023 ⬇
Beware of those that never lose! If we revel in a loss and double down on the learnings from it, we can use it to strengthen and improve our process. Over time, new losses will occur, but the goal is to make them smaller, to never stop compounding, and to always learn.
How do you feel about investors that only share their winners?
It’s time for this week’s ideas ⬇️
3 2 ideas of the week
Guillemot Corp. (Ticker: GUI.PA)
Category: French microcap cyclical cash generator
What does it do?
Guillemot manufactures and sells hardware and peripherals in the entertainment industry. Their best-known brands are Thrustmaster (think PC gaming accessories) and Hercules (DJ equipment and software). Probably not known outside of the US, but I had a Thrustmaster joystick for gaming when I was younger!
Why should you care?
Expected to have a great H2 in 2024 and this might not be priced in at the moment. Multiple reports of some of their products (racing wheels) seem to be strong sellers not seen since the COVID lockdowns. If margins are similar to the past, and with the success of H2, the company could be trading at a forward EV/EBIT of 3 or 4. I would not hold this one until eternity, but could be an interesting short-term play.
Orbit (Ticker: ORBI)
Category: Microcap Defense Industry play
What does it do?
Orbit develops airborne communications, satellite tracking, and audio systems. 75% of revenue is generated by the defense industry which overall market is set to expand. It creates mobile satellite communication systems, ground tracking systems, and communication management systems.
Why should you care?
On the brink of change. System development for Lockheed Martin will complete in 2024 with purchase orders arriving in 2025. Backlog contracts have grown by 60% while revenues have not (only 18%). A trailing EV/EBIT of 12 on trailing numbers
Only 2 ideas this week…
May the markets be with you, always!
Kevin
Asking whether one manages to beat the index every year may end up being the more severe question.