The Last Stockpicker and the Unreal Hunting Grounds
How do you find a perfect stock? That’s a frequent topic of talks I give to curious audiences interested in the art of stock picking. It is always very inspiring and encouraging to me to see others getting curious about becoming active stockpickers in a world where passive investing, high frequency trading, robo advisors, bots, machines, and algos seems to have become all the rage.
I believe none of these can replace the actual skills, where we look at the businesses we buy, and we care about the price we pay. The more auto-robo-algo investing becomes, the more opportunities exist for disciplined and patient investors. And when we are the very last stockpickers still practicing the trade, we will roam freely in what my friend Jake Taylor (author of The Rebel Allocator) calls “the unreal hunting grounds” full of panics, inefficiencies, and buying opportunities.
Like any skill, I firmly believe that stock picking improves with practice. What’s more, it only lasts if it’s passed on. That’s part of the reason why I am always so eager to share with my audiences what I have learned so far. Public speaking is a two-way street for me: I love to share what I know, but I’m also curious to learn from my audience. One of the talks I gave last year inspired me to look back at the path that led me to becoming a stockpicker and investor myself.
If you’ve read my books or heard my TEDx talk, you probably know how much I credit Peter Lynch’s book One Up on Wall Street for the direction of my career and my early fascination with stock investing. I believe that throughout our lives, we are molded to do exactly what we do best. Growing up in Poland during a spectacular economic and political transformation shaped me as a future investor in many ways. I have seen and lived through what many of my American or European contemporaries have only learned about from books, including the often-feared hyperinflation.
You might not know, though, that my very first training in discipline and patience was formed picking — not stocks, but mushrooms, and not on Wall Street, but in the enchanting woods of Poland, not long after I learned to walk!
My better half, Megan, on her very first mushroom-picking trip last fall, compared the experience to a treasure hunt in some fairy tale land. After a long, fruitless hour of walking, you eventually find a mushroom hiding under some leaves. This little reward gives you enough renewed hope to keep going. Your commitment gets tested again and again, but each time you’re ready to give up yet again, another mushroom appears! Not that different from stock picking, if you ask me.
Like mushroom-picking, selecting stocks that are worth investing in is simple, but far from easy.
Most mushrooms are not only not edible, they can be actually poisonous, even fatal with such endearing names as a death cap, which actually happens to deceivingly resemble some of the edible ones! I can think of many stocks that should carry similarly poignant names!
In my experience, many investors who think that investing is easy walk away empty-handed, often bruised by massive losses; many mushroom pickers return from the hunt with poisonous pickings, empty buckets or clothing tattered by thorns. Other similarities: It takes a certain skill and considerable luck and patience to find mushrooms in the woods. After a few years of practice, experts can predict or even smell where the mushrooms might be hiding.
Lastly, given what you just learned, I’d think you wouldn’t want to taste a mushroom soup cooked with all possible species one can find in the woods or eat the first random mushroom you come across, would you? …yet I’ve seen so many investors out there unwittingly put their life savings in funds that hold the good, the bad, and the worst stocks out there or buy stocks without looking at the business behind them or the price they pay.
If mushroom picking skills fade away, the same way some fear stock picking skills are expected to vanish, and the last mushroom picker heads to the woods, he or she will be amazed by the abundance of unpicked treasures all around. My parents and grandparents have told me tales of plentiful large mushrooms in the undiscovered woods of their childhood. Many fellow seasoned investors, including my partner, and mentor, Mr. François Sicart reminisce about the equally abundant stock-picking times of their earlier careers.
I’m reminded that often history goes through cycles. The recent period of the longest-ever bull market, and the post-March rally might have set the stage for slim pickings. But last year’s briefly-renewed volatility, and this year’s March market crash have given us at Sicart enough enticing opportunities to renew hope for the years to come. We believe that we might be among the few stockpickers around when the most promising unreal hunting grounds appear right in front of us. We don’t mind, we are actually thrilled about the unreal hunting grounds that may be ahead.
Going back to mushrooms, as you may know from my earlier articles, Megan and I traded our city apartment for a cabin in the woods, and you can’t keep me out of the mushroom picking grounds for too long. Needless to say, we did discover some unbelievably rich hunting grounds in the National Forest that surrounds us. Some of the sizes of the tastiest mushrooms we found happened to be even bigger than the most impressive specimen I recall finding as a kid in the woods of Poland. Maybe history does repeat after all!
In the meantime, let’s practice the stock picking skills because when the time is right, we might be the only ones still picking — and pick we will!
Lastly, we don’t believe that everyone has to become a stockpicker himself or herself. As you know well, we are always happy to help, and do the picking for you!
This article is not intended to be a client‐specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. This report is for general informational purposes only and is not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally.