Anyone who plays with the public markets thinks they know enough to make big gains, but the ups and downs of trading can serve as a stark reminder that you’re never finished learning.
In Equity.Guru’s If I Could Start Again series, we talk to some of the savviest investors and analysts and newsletter guys around and ask them what mistakes they’ve made, what their big wins have been, and what they’d do differently if they could start from scratch with $1000 in their hand.
PETER EPSTEIN is a New York-based analyst who runs EpsteinResearch.com, focusing on the resources sector but by no means restricted to that.
We asked him to tell us about how he got into the business:
My first foray into investing was, without doubt, as a kid in the 1970s. I invested in baseball cards. I amassed an empire worth US$5k. The investment returns were double digits, but then again, so was inflation! The skill was to buy cards of rookie players, “rookie cards,” that turned out to be stars. A lot like buying shares of early-stage miners, but way easier. Returns on strong rookie player cards were routinely 100%+ over a 1-2 year period.
What was your personal investing highlight?
My biggest score is obviously still ahead of me. Looking back, I made some coin in the dot.com bust acquiring distressed bonds of Telecom companies. Returns were 5x-10x on the best ones. I bet on real companies that got caught up in the Internet craze, guilt by association. It was intoxicating to have high conviction in these distressed bonds and be right. My career as an investor, like many, has been downhill ever since.
For me, natural resource company management teams have been the bane of my existence. I continue to believe that 84.67% of the time they speak the truth, but that estimate of truthfulness has proven to be way too high. Not all of them are lying to me, but there are a lot of guys who are drinkers of their own kool-aid. I routinely haircut a management team’s view of the future by a substantial amount and, even then, I’ve gotten burned again and again.
Which sectors have strong long-term to you?
How long do you hold on to a winner? Or a loser?
Successful selling is more important than buying. High risk, high volatility stocks can move higher by multiples, buy you can only lose 1 multiple, otherwise known as 100%. That’s not intuitive for some so, think about it. Selling losers is usually a shit show. Yes you sell too late or the stock bounces back somewhat the next day, but once one has given up on a stock, just sell it and buy your next big loser.
It gets really, really hard to be positive on stocks once they’ve soared. Even if I have strong conviction that a stock still has a lot of upside, I expose myself to the possibility that the stock could collapse, calling my integrity into question. People will ask, was I just pumping the stock?