The blog turns 5 today and I thought I’d use the opportunity to reflect over the pros and cons of blogging as an investor.
- You learn a bunch. And by writing you crystalize your thoughts.
- By being public about your stock picks you put maximum pressure on your process to be rigorous. Looking like a fool too often is no good.
- You get feedback that allows you to rethink your ideas and possibly drop them completely. Immensely valuable when it happens however irritating it may be in the moment when you realize you need to drop an idea you have spent a lot of time on (a common bias).
- Investment research is a solitary undertaking. Talking with managements and other investors take very little time in relation to all the hours of reading and thinking on your own so other outlets for social interaction about a subject you care about deeply takes on an increased importance.
- I’ve increased my investing network many fold both on and offline as a result of blogging and the benefits of that cannot be understated.
- Make sure you stay agile and nimble! Don’t get tied to your picks as a result of going public with them. If a thesis changes on a fundamental level and the price doesn’t reflect it cut ties with it. Before blogging I was sure I wouldn’t run into this issue but it really is a lot harder than it sounds, as many other bloggers will attest to.
- Realize that your blog is about idea generation and only that. A starting point for others to dig further if they think there might be something there. I have personally spent too much time updating a thesis on a quarterly basis and it is just too time consuming when writing a blog in your free time. Better to keep on researching new ideas.
- Don’t write for the sake of adding content after a hiatus. Don’t be one of those. Wait until your heart is full. Wait until you are certain what you have to say adds value.
- Realize not all picks will work out. I had a pick that went terribly wrong a few months after starting writing my blog (Polarcus, a seismic name) and it weighed heavily on me that others might have been affected to an extent that I considered quitting writing. But it is the nature of investing that sometimes you are the hammer and sometimes you are the nail. Some of our picks WILL fail.
On the performance side I’ve had a nice run these five years: 23.9% CAGR from Oct 9th 2014 till now. This is a somewhat deceiving number though because it is measured in SEK, a currency that has been on a downward spiral in recent years. Also, individual periods have been lumpy with massive drawdowns exceeding -30% twice. And if I exclude my two best years, 2016 & 2018, I land on 4.5% CAGR after significant underperformance in both 2014 and 2015, as well as slight underperformance in 2017. So it is a testament to the fact that the concentrated deep value approach exposes one to some wild storms along the way and it isn’t always easy to hold on when a protracted downswing is taking hold.
Five years is close to meaningless in the investing universe so it could very easily be the result of a large part of positive variance (luck). But still I’m glad that the results stack up well vs momentum/FANG strategies that have really had the wind at the back in this period. I suspect that in the coming years the tide will turn and the wind will be at the back of deep value. Personally I’ll be satisfied with returns in the 10%-15%-range in real terms and an outperformance of the general market of 5%+ (to justify making investing my job, otherwise indexing would be an alternative).
Before starting my blog I believed that market beating returns are very possible for investors who invest relatively small sums of money and who restrict themselves to looking at areas where smart money generally can’t go due to illiquidity concerns – and I obviously still believe that. From watching many in my network produce solid numbers when averaged out over a number of years I am absolutely certain that the efficient market hypothesis is BS and that you can as an individual investor beat the market over time if you are disciplined about it and stay away from what everyone else is looking at.