Stockhouse member littleguy123 reveals stock portfolio management strategy.
Today marks the launch of a new series on Stockhouse: Portfolio Spotlight. Our first victim is none other than outspoken SH community member littleguy123, who agreed to answer a host of questions regarding his public portfolio for the benefit of Stockhouse readers. lg123 is not the only one participating though – look for upcoming Q&As from other members in the days and weeks ahead.
To read more of littleguy123’s work, check out his Stockhouse blog Outside the Market.
Don’t forget that if you have comments for littleguy123 or for the community at large, you can post them in the comment box below. The comment box is also a great place to leave suggestions for future interview questions or other interview topics that might be interesting to the community.
Now on to the interview…
SH: How would you characterize your investing style?
LG: I consider myself a short- to long-term investor. It's crazy to pass up quick short-term profits when they are handed to you. However, I rarely put any money into a stock unless I strongly believe it has good long-term prospects. This way, if profit opportunities don't arrive quickly, I won't feel pressure to dump a stock into an unfavorable market. I never use margin.
SH: Where do you get your investing ideas from?
LG: I used to listen to ideas from a wide variety of sources. As my knowledge (and investor-sophistication?) has improved, I've been doing less listening, and more finding on my own. When I do act on an idea from others, it's generally from a small group of friends, a few analysts in whom I have confidence, and occasionally, simply through stumbling across an idea through “strangers” - either on Stockhouse or elsewhere.
SH: Explain what’s in your public portfolio on SH and why those securities are there; why did you choose those stocks?
LG: My (recently created) public portfolio represents a mixture of my largest holdings, and my longest holdings. All are junior mining companies. When I began trading on my own a couple of years ago, I based my strategy on the "KISS principle" ("Keep It Simple Stupid") - as a permanent eye injury restricts the amount of reading I can do. With my economics background, I could see that industrial commodities and precious metals were destined for decades of robust growth and MUCH higher prices. In addition, in my opinion, mining stocks are relatively straightforward investments. There is a fixed set of criteria for evaluating companies, and a close correlation with macroeconomic data - making it relatively easy to forecast over the longer term. More specifically, I'm heavily into mining companies with most/all of their operations in Mexico. Based on what I've learned, I see Mexico as the optimal mix of low risk, low costs, and considerable untapped mineral wealth - as very little of past Mexican mining has employed modern techniques for locating ore, or extracting it from significant depths.
click here for full-size chart
SH: What kind of performance have you had in your portfolio? Up, down, sideways?
LG: Can I defer the answer to this question for 3 months (lol)? I'm currently down on most of my holdings, given the two-month slide in share prices. I have several big gainers, and a few BIG losers - which I refuse to sell, given the current climate and valuations. While we all end up swallowing some losses over the longer-term, I am very comfortable with my current holdings - and sleep well at night.
SH: Do you plan on making any changes to your portfolio in the near future?
LG: My plans for the near future center more on altering my focus and strategy, more than changing content. I will likely concentrate my holdings slightly more, which means “weeding out” a few small holdings and adding to a few preferred holdings. I also intend to look to do more short-term trading, as I feel a little more confident in judging valuations as I gain experience.
SH: Do you see a value in having a public portfolio on SH? Do you find it helpful when judging a member’s contributions to the site?
LG: Since I just created my own "public portfolio," I don't yet have a strong opinion on the subject. Obviously, with Stockhouse members not publishing their true cost bases, the information can be misleading - even self-serving.
[Editor’s note: We have purposely set up the public portfolio program on SH so that it cannot be manipulated based on cost basis, though the sky’s the limit in the private portfolio.]
SH: Is your portfolio weighted toward a particular sector / commodity / service / trend?
LG: As mentioned before, I'm currently VERY heavily focused on base and precious metals (currently more than 75% of my portfolio). The global commodity boom is based on the largest global economic expansion in history - as 5 billion OTHER people play "catch up" with Western economies (and standards of living). My particular focus on precious metals is also highly centered around the Soviet Union-like economic meltdown which has begun in the U.S. The USD weakness will not end in the foreseeable future - and could easily accelerate, if the boobs at 'The Fed' choose to postpone necessary (downward) economic adjustments by invoking hyper-inflation (i.e. The Weimar Republic).
SH: Are there any new trends that you’re following that might influence your portfolio in the future?
LG: It's not really a "new trend," but I want to add some soft commodity exposure to my portfolio - which most likely means buying into one or more fertilizer stocks. Perhaps my only new idea is taking a look at water treatment companies - as that niche has close ties with the mining industry, making it a natural choice for diversification.
SH: Are there any Stockhouse members you like to follow to help you with your due diligence?
LG: At this point, I've built up a circle of friends/contacts through Stockhouse - and regularly exchange ideas, not so much for individual investment ideas as for gauging general sentiment or new sectors of opportunity.
SH: What has been your greatest success as an investor? (Best investment)
LG: My successes are still modest, but the largest percentage gain to date is with Pelangio Mines (TSX: T.PLG, Bullboard), which I bought into under $1.30 and continue to hold. At the moment, it's about 30% off its recent high of $4.80. I am currently EXTREMELY bullish on Great Panther Resources (TSX: T.GPR, Bullboard).It's my largest holding, and I've been eagerly adding shares at the current valuation. I am extremely confident this will become my best investment.
SH: What has been your greatest failure as an investor? (Worst investment)
LG: That's an easy one. I held some Barrick Gold (TSX: T.ABX, Bullboard), and watched it trade sideways for about two years. I finally got impatient, and sold it - and the stock rose 50% over the next few weeks.
SH: Any parting advice for new members joining Stockhouse?
LG: Don't gamble. This means several things, but mostly don't attempt trading/investment strategies above your level of expertise. Don't use margin. Don't invest in highly speculative stocks (like junior miners, lol) if you don't have a solid grasp of fundamentals for both the sector, and individual companies. Don't a put a penny into ANY U.S. investment.
SH: Would you care to share your outlook for the global economy in the next few years?
LG: That's a very difficult question over the short term, and a very easy one for the long term. Short-term, it is uncertain if the GLOBAL financial system can withstand all the "toxic paper" circulated by the fraudulent U.S. banking sector. If it can't, a collapse of the global financial system could very likely mean a collapse - even an END - to our "fiat monetary system" (i.e. money backed up by nothing but dubious IOU's from debt-laden governments). That could easily put the brakes on the global growth boom for up to a decade. In such circumstances, I can't see ANY investment other than precious metals providing a "safe haven."
If the global financial system survives, we will see the continuation of the greatest economic boom in global history - punctuated by normal, inevitable cyclical downturns.
SH: Is there anything we didn’t ask that you’d like to add?
LG: Find news sources you can trust. Most of the mainstream media have become completely unreliable for ANY kind of analysis. This is due to a combination of laziness/incompetence, personal bias, and corporate pressure to put positive “spin” on data relating to large-cap companies in general, and most specifically the U.S. financial sector ("the root of all Evil"). In this respect, I'm finding Stockhouse is becoming a more useful information source, as mainstream media simply have less and less to offer me.
That’s all for our first interview! Again, feel free to leave comments, criticisms, suggestions etc. in the comment box below, and look for another Portfolio Spotlight coming soon.
Special thanks to littleguy123 for participating.
