The DIY Investing Podcast

Do you want to learn how to manage your own investments? Are you ready to stop paying investment management fees and start building wealth? The DIY Investing Podcast is dedicated to providing you with the knowledge, skills, and resources you need to be a better investor. Learn how to make investments through the use of fundamental analysis, mental models, and business management insights. Please visit our website and subscribe to our mailing list at DIYInvesting.org for guides, videos, and resources to help make you a better investor.

137 - Expand Your Time Horizon 03/25/2024

136 - Selling Stocks for Value Investors (Part 1: Strategy Matters) 07/10/2022

136 - Selling Stocks for Value Investors (Part 1: Strategy Matters) Want Investing Research Directly to your Inbox? Sign-up for my Free Substack: Mental Models discussed in this podcast: Second-Order Effects Mean Reversion Factor Investing Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience. Follow me on Twitter and YouTube Twitter Handle: YouTube Channel: Show Outline Selling Series A lot of time is spent on buying stocks. Yet, almost just as important, if not more is knowing when to sell stocks. I find this area relatively underexplored, so I want to begin a long-term series on selling stocks from the framework of a value investor. Previously talked about selling in a single episode on Ep. 106 Today’s focus: Strategy matters There is no one-size fits all approach How you buy stocks will influence how you sell them Your portfolio allocation strategy will matter THe number of stocks you review in a year will matter Whether you plan to own a cash position or not will matter. Excluded from this series: Won’t be discussing momentum investing Won’t be discussing trading or technical analysis investing (except as a marginal part of value investing when relevant) Entire focus assumes that you are a value investor of some sort (whether deep value, compounder, graham value, quality, etc…) Deep Value: Buy at 2/3rds of value and sell at “full price” Compounders: You want to hold for a long-time. Sell when compounding ends, plateaus or you were wrong Net-Nets Hold a year then reassess Waterfall Stocks: Hold so long as dividend yield is sufficient to provide target return Dividend Growth Investing: Buy companies that pay dividends and grow them and sell them when they cut or eliminate their dividends Buy and Hold “Never sell” Works for a subset of stocks Tends to overlap well with compounders and Dividend Growth investing /episode/index/show/diyinvesting/id/23699729

135 - Investing in the Face of Uncertainty 07/03/2022

135 - Investing in the Face of Uncertainty Want Investing Research Directly to your Inbox? Sign-up for my Free Substack: Mental Models discussed in this podcast: Second-Order Effects Mean Reversion Factor Investing Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience. Follow me on Twitter and YouTube Twitter Handle: YouTube Channel: Show Outline Today’s podcast will focus on a single precept: You can’t predict the future First and Second Order Effects Margin of Safety Preference for cash now vs cash later (Plays into want for profitable companies) Time value of money. Growth is important because it can correct for mistakes, but you know you can’t predict it Some of what you “know” about investing may not be true Importance of Zero-Based Thinking (what is the best decision today based on what you know today) Wrong because past price performance can’t predict the future (it may, but it may not) Wrong because it assumes that winners will keep on winning and losers will keep on losing “Don’t catch a falling knife” “Hold onto winners, trim your losers” The central problem with rebalancing It is definitely true that successful rebalancing CAN add value It is also true that it is IMPOSSIBLE to know if your rebalancing will be successful How then do you behave? How do you invest in the face of uncertainty? First order: Second order: Investing in the face of uncertainty You cannot assume business momentum. You plan for it and buy stocks you think will have it, but your strategy cannot assume it will continue. You cannot assume reversion to the mean. You plan for it and buy cheap stocks because it offers the opportunity of reversion to the mean, but your strategy cannot assume stocks WILL mean revert in the time frame you want. You cannot assume that growth will continue. You cannot assume a specific growth target will be hit. You cannot assume that your predictions about business quality will be better on company A than on company B. The only thing you can know to be true is that the future is uncertain. I personally use some absolute rules (like no margin debt, no options, and no shorting). Not because they’re optimal, but because they limit my risk and allow me to take risks in other areas. Some of your decisions will be a mistake. That doesn’t mean you don’t make a decision. Indecision is a decision. Selling some winners may be correct and selling others may be a mistake. Your strategy needs to incorporate that understanding. “Absolute rules” can be helpful to limit mistakes, but they will inherently be suboptimal. What is my point: It would be a mistake NOT to trim when I am given the opportunity to do so. Failing to take advantage of opportunities that ignore zero based thinking will result in me having lower returns across an investment lifetime. You want to build a strategy that follows this precept: “If I lived my life 10,000 times, what strategy would result in a favorable outcome across the most possible lifetimes?” Don’t optimize for the “perfect” scenario. Don’t optimize for the “worst case” scenario. Optimize for uncertainty. Prepare for the worse, plan for the best, and adjust daily. There are aspects of my strategy that go against established norms. However, there are clear reasons for that. I know that I cannot predict the future. Therefore, I am willing to sell or trim my winners when I believe it improves my potential returns and reduces my risk. Summary: You cannot predict the future. Be more humble. /episode/index/show/diyinvesting/id/23616314

134 - Dollar Cost Averaging into Individual Stocks 06/26/2022

133 - How to Solve the Dead Money Problem? 03/27/2022

132 - Is it better to pay management fees or performance fees? 03/20/2022

132 - Is it better to pay management fees or performance fees? Mental Models discussed in this podcast: Incentives Skin-in-the-Game Accredited vs non-Accredited Investors Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience. Follow me on Twitter and YouTube Twitter Handle: YouTube Channel: Show Outline Key Concepts for thinking about compensating a Portfolio Manager Management Fees Management Fees are priced a percentage of the assets under management. A 1% management fee means that you will pay 1% of your assets being managed to the investment manager regardless of the returns you receive on your investment. If you have $100k invested at the beginning of the year, you’ll pay $1k in fees, if your investment doubles, and $1k in fees if your investment gets cut in half. (ignoring the weighted average effect) Management fees can be charged to both accredited and non-accredited investors Performance Fees Performance fees are priced as a percentage of the profit earned on investments over the course of a year. For instance: A 10% performance fee would provide the manager with 10% of the total profits earned during the year. If you invested $100k, and the $100k grew to $200k, then the investment manager would earn $10k. (10% of the 100k gain). However, if the investment fell to $50k, the investment manager would earn nothing. Performance fees can be charged only to accredited investors. Hurdle Rates Hurdle rates are often paired with performance fees to ensure that investment managers only earn performance fees above a certain level of return. For instance: A hurdle rate of 5% would mean that the profit sharing only kicks in after 5% returns have been earned for the year. In our prior example, if you invested $100k that doubled to $200k, then the “profit pool” is instead $95k, because the first $5k is exempt. The investment manager then only earns $9.5k. High Water Marks High water marking is where hurdle rates are compounded across multiple years. In this case, let’s assume you invest $100k, and the hurdle rate is 5% per year. In year 1: your investment declines to $80k. You pay no performance fees. In year 2: Your investment grows to $110k. You still pay no performance fees because despite earning 37.5% rate of return in year 2, the hurdle rate of 5% compounded in each year, so the investment manager only starts to earn fees after 10% (5% + 5%) on the original $100k. So they would only earn returns above $110k in year 2. In year 3: They only earn performance fee returns above $115k (ignoring compound growth here). The Buffett Model 0 % management fee, 6% hurdle rate (w/high water marks), 25% performance fee I think this is an attractive setup and I’d prefer to structure any future fund of mine with a similar arrangement. This is the best alignment of incentives in my view. You don’t get paid for AUM growth (directly), and only get paid for performance that beats a certain hurdle rate. However, to do so excludes non-accredited investors. Therefore, if I want to serve non-accredited investors I’d have to charge a management fee at least for them. What is the right answer then? Non-accredited: You only have management fees. You obviously want a manager willing to charge them, or you don’t get that manager at all. Accredited: Performance Fees may be your instinctual first option. They tend to align your interests with management. However, there are also downsides for you. May encourage managers to take more risk. Unless they beat a hurdle, they don’t earn anything. They’ll never be 100% aligned with you. Without a management fee, you are limiting yourself to investment managers who are already financially independent and can afford to have years without income. Personally: I would be willing to pay or charge both sets of fees. My ideal setup is the Buffet arrangement: 0, 6, 25%. However, this isn't ideal for all investors. I could see the benefit of a 0, 10, 50% setup. I can see the benefit of only charging management fees (especially for retired investors who are seeking wealth preservation, not growth) As always: The answer is it depends. But, I hope that I have given you the information you need to understand how it applies for you. Summary: As an investor, you want to properly align your interests with your portfolio manager. A key consideration is how to compensate and incentivize that manager with either management fees, performance fees, or both. /episode/index/show/diyinvesting/id/22421117

131 - How to choose an Investment Manager? 03/13/2022

131 - How to choose an Investment Manager? Mental Models discussed in this podcast: Opportunity Cost Alpha Superpower of Incentives Competitive Advantages Process vs Results Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience. Follow me on Twitter and YouTube Twitter Handle: YouTube Channel: Show Outline Key Concepts for selecting a Portfolio Manager Choosing an investment manager is a lot like choosing a stock Don’t invest in anything you don’t understand - this includes managers What is their process? How do they earn alpha? Do you need alpha? What are your financial needs? Wealth preservation? Wealth Growth? Do you need alpha? Not every manager can provide alpha. Not every manager seeks alpha Not every investors NEEDS alpha Value Cost - How are they paid? What is the expense structure? How does it compare to alternatives? Management Fees Performance Fees Next podcast will be a whole podcast on fee structure, so I’ll limit my discussion on it here. Growth Investment managers inherently benefit from growing AUM. This is unavoidable. Regardless of pay structure. However, you want to understand what drives them. Is investing a passion or a money seeking endeavor? Are they trying to grow AUM? Do they plan to shut down growth at some point? Quality Competitive advantages? How are they different from other investors? Communication? How do they communicate with clients? Do you understand their process? Are you comfortable with them? Style Size of stocks Liquidity Value vs Growth vs Quality? Overlooked companies? Index hugging? Concentration vs Diversification Custom Portfolios vs Investment Fund Some managers will setup a customized portfolio just for you Or do you simply want to own a portion of a mutual fund or hedge fund. Past Performance - Luck vs Skill It is difficult to analyze a portfolio manager based on past performance Instead, focus on their process. If you understand their process you can potentially understand the odds of future outperformance (if you even need outperformance) Summary: Choosing an external investment manager for your wealth is a difficult decision. In this episode, I outline the key concepts you should consider when evaluating someone to be your personal portfolio manager. /episode/index/show/diyinvesting/id/22420997

130 - How to invest during a crisis? 03/08/2022

129 - What is the role of a Catalyst in Value Investing? 02/20/2022

128 - Key Investing Ratios: P/E, P/S, ROA, ROE, Gross Margin 02/13/2022

127 - Scuttlebutt on Overlooked Companies 02/06/2022

127 - Scuttlebutt on Overlooked Companies Mental Models discussed in this podcast: Scuttlebutt Quality Investing Capital Stack Dark Stocks Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience. Follow me on Twitter and YouTube Twitter Handle: YouTube Channel: Support the Podcast on Patreon This is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at . Show Outline The full show notes for this episode are available at Scuttlebutt on Overlooked Companies - Areas of Focus Capital Stack: Clean is better. Ideally only common stock. No lending to insiders or other self dealing. Has management issued themselves options in the past? Were the prices reasonable? How much of the company does this represent? "Overdue or delayed payment to insiders." Red flag. This basically menas the company is in default putting your equity at risk. Can't even really mount a proxy fight because the management could force the company into bankruptcy. Filings: Current or pink limited on filings with the SEC I want to see financials. (They don't have to be audited) Some sort of management commentary is nice. (Shows shareholder friendliness) Business Model: Change New products New management Growth of some kind Asset Base: Ideally assts to cover the market cap (providing a margin of safety) Earnings Power: Profitable (every year for 10 years, no more than one loss in 10 years) Summary: Overlooked companies are often cheap. Therefore, scuttlebutt on overlooked companies needs to focus on filtering for the quality of the business. High-quality and cheap makes for a great stock. Look for abnormal signs of positive potential. /episode/index/show/diyinvesting/id/21937193

126 - Series I Bonds: My Inflation Protected Emergency Fund 01/30/2022

125 - Phase Change Investing 01/23/2022

125 - Phase Change Investing Mental Models discussed in this podcast: Phase Change (Chemistry) Earnings Power Consolidation Period Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience. Follow me on Twitter and YouTube Twitter Handle: YouTube Channel: Support the Podcast on Patreon This is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at . Show Outline The full show notes for this episode are available at Phase Change Mental Model In Chemistry, you have the mental model of a phase change. Think: Solid, Liquid, Gas In order to exercise a phase change youhave to increase the energy in a fluid. Increasing energy causes the temperature to rise, but when a phase change is close to occurring, the temperature will stop increasing for a period of time. During this time, you have to keep increasing the energy, but the temperature will stay the same. Why? The excess energy is being applied to changing the phase of the fluid. This pause is incredibly important and the amount of energy needed to change phase is the "latent heat." In the same way, you should try and profit from businesses undergoing a phase change. Applying the Phase Change Mental Model to Stock Investing Two ways to look at this: Underlying earnings power Shareholder base changes Underlying Earnings Power Often, stocks may be stuck in a trading range for a period of time, months, maybe years. On the surface (via the stock price) no change appears to be occurring. However, under the surface, the company is improving, cutting costs, building new products, and pleasing customers. Then all of a sudden, th e company breaks out to new highs as eanrings go up 50%, 100%, or 200% when a new product launch occurs and operating leverage plays itself out. Shareholder Base Changes There are a diverse set of possible shareholders you need to be aware of. Types: Deep value Value Growth Momentum Speculators Sizes: Retail Institutional Investors Active Funds Passive Funds It can take a long time for a shareholder base to change over and that's one of the things that can occur during this consolidation period. Deep value sells to value, value sells to growth. Retail sells to Active funds, and active funds sell to passive. If you want above-average returns, it can help to ride the wave from one set of investors to another. If you can buy stock as a retail investor when NO isntitutional investors are involved and then wait long enough to sell to institutional investors, you can be bneefit from massive multiple expansion as the liquidity that they bring forces the stock price up faster than earnings. Phase Change Investing Applied to My Portfolio I want to buy stocks when they are nano-caps, trading for sub $50m and sell them after they have 10-20x becoming Small-Cap companies. The goal is to hold them through their nano-cap and micro-cap phases when there are no institutional investors and sell them once they are in the $500m-$1bn+ range. At that time, ETFs, mutual funds, and hedge funds will be involved and I may be able to benefit from buying at sub 10x P/E multiples and sell at 25+ P/E multiples to these passive investors. This process may take many years, but it can lead to supercharged returns. Summary: A phase change occurs when excess energy is added to a fluid. For aperiod of time, energy rises without temperature changing. Investors can learn from this mental model how to seize investing opportunities during consolidation periods. /episode/index/show/diyinvesting/id/21865088

124 - How I Value Trade Stocks 01/16/2022

123 - Maintenance Due Diligence 01/09/2022

122 - Are you the next Warren Buffett? 09/19/2021

121 - Q/A: Questions for Management, Due Diligence, Share Issuance 09/12/2021

120 - Philosophy of Concentrated Investing 09/05/2021

120 - Philosophy of Concentrated Investing Mental Models discussed in this podcast: Concentration vs Diversification Hurdle Rate Circle of Competence Conviction Opportunity Cost Satisficing Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience. Follow me on Twitter and YouTube Twitter Handle: YouTube Channel: Support the Podcast on Patreon This is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at . Show Outline The full show notes for this episode are available at How many stocks should you own? As many as you can that meet your hurdle rate? Only the best opportunities available? Optimal vs Satisficing Constraints on Holdings: Time Circle of Competence Conviction Additional Thoughts Collector of Businesses Hypothetical: What is the highest level of concentration an individual investor should be willing to place into a single stock (when buying?) Specifically, asking about non-special situations, more long-term holdings. Presumably, at some point, cat-risk is too high even when you have an edge. Imagine you own a 5-10 stock portfolio. Over the weekend, it is announced that all 10 companies are merging and will be subsidiaries under a single capital allocator that you like. Do you make any portfolio changes? You still own the same companies, but now 1 stock, not 10. What are you buying when buying a stock? Concentration: " The number of stocks you own is dependent on how you view yourself as an investor." Is it possible to produce alpha? If yes, concentrate If no, diversify Are you a good investor? If yes, concentrate If no, diversify Conviction If yes, concentrate If no, diversify Summary: How many stocks should you own? This is a critical question without a single answer. Your portfolio concentration is constrained by time, circle of competence, and conviction. /episode/index/show/diyinvesting/id/20292716

119 - How to become a Self-Made Millionaire 08/29/2021

118 - NACCO Stock Post-Mortem $NC 06/29/2021

118 - NACCO Stock Post-Mortem $NC Mental Models discussed in this podcast: Durability Post-Mortem Resulting Capital Allocation Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience. Follow me on Twitter and YouTube Twitter Handle: YouTube Channel: Support the Podcast on Patreon This is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at . Show Outline The full show notes for this episode are available at Timeline NACCO spun off Hamilton Beach Brands in September 2017 I first bought shares in March 2018 at a price of $40 per share I averaged down in May and June 2018 with shares at a price of $34 per share. Averaged down in September 2018 at $32 per share and October 2018 at $29 per share Within a year, the stock doubled to over $65 per share in October 2019. This is the recent peak. Instead of selling, I held because I valued the company at $75 per share at the time. It wasn't yet at fair value. May and June 2020, I averaged down again at $26 per share and then $22-24 per share. In March 2021, I recognized that holding $NC was a large opportunity cost on my portfolio and I shifted some money to other stocks while the stock was around $24-25 per share. In May 2021, I exited my stake in $NC completely at a loss around $25-26 per share. Some lots were sold at a gain and some at a loss. Overall, the position was a net loss and a much bigger loss on an opportunity cost basis. Thoughts and Key Questions I should have sold or trimmed after the stock doubled in less than a year. $65 per share was within my error margin for my $75 fair value estimate. Even simply reducing my stake by half would have been a good decision. The main reason I didn't do this was that it would have had to sit in cash. I didn't have many other good ideas at the time. My biggest mistakes are often made when I'm in cash or when I would be creating a cash position. (Always do research for new ideas!!!) Was buying $NC in the first place a mistake? No, I don't think so. My theory was sound. I expected positive news from NACCO and it was cheap at $40 per share. It was the best idea I had at the time, I was also running a diversified 10-15 stock portfolio when I bought NACCO. My thesis was correct, but I had thesis creep as news flow came out. My original valuation placed the stock as worth between $50-65 dollars. I only upped my estimate after high natural gas income. I should have recognized that was temporary and sold. I thought NACCO was a 3-5 year hold business, but it probably should have been sized as a last puff cigar butt. When that puff came within a year, I should have sold. Did I accurately assess NACCO's business model quality? Yes. NACCO's service model of earning money from unconsolidated subsidiaries allows it to earn high returns on capital as the customer puts up all of the capital. Did I accurately assess the durability of NACCO's business? No. I misestimated the likelihood of a coal mine closure. I did assess that coal mine closures were likely and I accurately predicted the degree to which they would harm the business. However, I underestimated the degree to which NACCO's stock would decline. I thought the decline was overdone. Did I accurately assess management/capital allocation? Partial yes, Partial No. I accurately predicted that management would NOT dedicate new capital to new coal mines. I accurately predicted that free cash flow would be dedicated to growing the North American Mining business. However, I underestimated the maintenance CapEx needed for the MLMC consolidated coal mine. This sucked up a large amount of cash flow for the 3 years I owned the stock. Future maintenance CapEx is going to be lower, but the timing was bad on my part. I also underestimated the ROIC from the money put into the North American Mining business. I expected higher returns for the cash outlay. Thoughts and Lessons Learned Don't buy companies that lack durability and really dive into this question of durability. A mistake on durability could mean that a very low P/E is justified. Personal preference: I highly prefer buying steady growth companies. I did not enjoy the constant negative and bad news reports from the company while I owned it. The primary problem with owning NACCO for the last 3 years was the opportunity cost of how that money could have grown with other better companies. My actual losses weren't that high. Some of my purchases made a profit. However, the process of turning one profit center (COAL) into a new profit center (NAM) is slow and costly. That's basically a turnaround situation. I don't want to own turnaround situations until after they've been turned around. It's basically dead money Creates large opportunity cost situations Management is critical I want a management team that I believe is fully aligned with me on skin-in-the-game. NACCO has a good management team, but they don't run the company how I would run the company. They receive regular ongoing stock options and issuance which dilutes me as a shareholder. There isn't a lot of insider buying and there weren't a lot of share buybacks which I would have preferred. If I were assessing NACCO today, while I still believe it is cheap, I don't think it would pass my current management/capital allocation filter. Perhaps that will change in the next 5-10 years. Be wary of thesis creep. NACCO would have been one of my best success stories if I simply sold it after it hit $60 per share. A quick double and it would have been a lot of money for my portfolio as a 20% position. Instead, I allowed my thesis to creep which resulted in $NC being a drag on my performance for years 2 and 3 of my holding period. Summary: I want to buy and hold high-quality, durable businesses that are growing AND are selling at a cheap price. NACCO had a cheap price and was high-quality, but it was of low durability and had no growth. Going forward, I am going to be more diligent at filtering out ideas that don't meet ALL of my highly stringent criteria. /episode/index/show/diyinvesting/id/19638728

117 - What risks are you willing to underwrite? 06/21/2021

117 - What risks are you willing to underwrite? Mental Models discussed in this podcast: Operational Leverage Risk Management Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience. Follow me on Twitter and YouTube Twitter Handle: YouTube Channel: Support the Podcast on Patreon This is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at . Show Outline The full show notes for this episode are available at Business Risks Stock specific Acceptable: Price - I'm willing to compromise on my price target of less than 10x earnings in recent days. Now I'm willing to accept up to 15x earnings per share for high-quality businesses Growth Rate Estimates - I'm willing to accept being wrong on my estimate of growth. I'm usually targeting businesses that grow revenue/earnings at double-digit rates. If my pricing is right, I can be wrong on my growth rate assumption and still do fine. Operational Leverage - I'm willing to bet on and be wrong about operating leverage Unacceptable: Balance Sheet Liquidity - I want a liquid cash-filling balance sheet Self Funded - I don't want to buy a company that has to be funded by debt Bankruptcy Risk - No bankruptcy risk of any kind, which means I am unwilling to accept highly leveraged companies. Commodity Risk - I'm not willing to accept exposure to commodity prices. Portfolio Risks Related to your overall strategy or investment portfolio Non-stock or business-specific Acceptable: Illiquid stocks - I'm willing to accept lower liquidity in my stocks than other investors. I'm willing to spend months building my positions instead of just days or hours. Concentration Risk - I'm willing to hold fewer stocks than other investors. (3-5 companies) Tracking Error Risk - I'm willing for my results to be dramatically different from the results of an index like the S&P 500 or the Russell 2000. Unacceptable: Unwilling to underperform inflation for long periods of time. (5-10+ years) Unwilling to underperform a 10% baseline absolute return over time Brings in decisions like how to address cash drag I have realized while preparing for this show that I don't really know what my "unacceptable risks" should e on a portfolio-wide basis. So let me know what I'm missing. You can send me an email or DM me on Twitter. Summary: As an investor, the risks you take can be categorized as either business risks or portfolio risks. In order to earn a return, you must take some risks from each type. In other words, how are you willing to fail? /episode/index/show/diyinvesting/id/19543685

116 - Learning from mistakes you narrowly avoid $MCLDF 04/27/2021

116 - Learning from mistakes you narrowly avoid $MCLDF Mental Models discussed in this podcast: Confirmation Bias Skin in the Game Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience. Follow me on Twitter and YouTube Twitter Handle: YouTube Channel: Support the Podcast on Patreon This is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at . Show Outline The full show notes for this episode are available at mCloud Technologies - $MCLDF SaaS company Trading at just 1x expected revenue Energy efficiency (Oil and Gas Plant efficiency) Green Energy (Wind Turbines, HVAC efficiency) Uses AI Problems: Cash flow negative (Presumably in the name of growth) Regular ongoing stock issuance and dilution Both shares and warrants "An assumption that this is the last time." Very promotional management (with skin-in-the-game?!?) "Uplisting to the NASDAQ" talk A lot of examples of SaaS names going from 1-2x revenue while on the Canadian TSX market to 10x+ revenue on the NASDAQ in the US Still hasn't occurred many years later Mergers and acquisitions using stock (Not cash, because they don't have any) Growth targets include non-organic growth (REALLY BAD) Dilution is required, but it makes it impossible to model per share returns Exit: Liquidity event needed for the payoff (Either sell to another company or an uplisting) Lessons Learned: Don't buy promotional companies Don't buy companies that dilute Don't buy companies that can't self-fund growth Insider ownership does not equal skin-in-the-game Be wary of 'uplisting' as a catalyst Summary: Investors need to constantly be wary of confirmation bias and stay alert for possible red flags. mCloud Technologies stock $MCLDF taught me this lesson. Don't buy promotional companies that dilute shareholders and can't self-fund growth. /episode/index/show/diyinvesting/id/18873353

115 - How to rebalance a concentrated portfolio 04/18/2021

114 - Solitron Devices Stock Thesis (SODI) 04/11/2021

113 - Never Buy or Sell Options! (Investing Rules) 03/28/2021

112 - Never Short Stocks! (Investing Rules) 03/21/2021

111 - Eliminate your investing mistakes 02/28/2021

110 - How I am incorporating Momentum into my Investing Process 02/07/2021

109 - How much time should you research a stock before buying? 01/31/2021

108 - Coffee Can Portfolio Investing 01/24/2021

The DIY Investing Podcast

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