[su_quote cite=”Warren Buffett” class=”wwd-post”]”I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”[/su_quote]
Dear FutureMoneyTrends.com Subscriber,
If you find yourself getting focused on nothing but the day to day price of the stocks you own, then I really believe you are more likely to lose money than make money.
As for the economy, look at the 1930’s, this was not just a great time to buy shares of good companies, it was the best time. And like the 1930’s our economy is horrible due to government intervention. Also mimicking the 30’s is the average retail investor avoiding the stock market, another very bullish sign for the markets.
Don’t let uncertainty overtake your life or you will miss out on a lot of great opportunities to become a business owner. During the 20th century we had a severe Depression, several recessions, world wars, and many other shocks to our economy, yet the drive for businesses growing gave even investors who just bought the Dow Jones a 17,320% gain (excluding dividends), the Dow went from 66 to 11,497.
First you need to fully appreciate that stocks are not just some piece of paper like a worthless fiat currency. A stock is a fractional piece of ownership of a business. Essentially you are a business partner, the CEO and other executives are the managing partners, but you are a shareholder in the business along with them.
A good example of how you should look at a stock is if you purchased a small business with a few friends, would you constantly concern yourself with how much you could sell your shares for?
When I decide to become a business partner by taking ownership in shares of a public company, it is for one of two reasons.
- I’m looking for capital appreciation because of anticipated future growth in the business.
- Cash flow, I hate just having my wealth sit around stagnant.
So if you own a company for cash flow, then it is extremely important to buy it undervalued. You don’t want to dollar cost into a fairly priced investment, you want to put one chunk into a great undervalued investment and then as it rises, enjoy those dividends.
When looking for capital appreciation, I prefer the companies that are hated or are yet to be on anyone’s radar. My biggest advantage, besides being patient, is that I make it a point to know the people which helps me make money because it is important to know the team in any long term investment. Trust me, you will need the resolve and trust if you are going to see a 10 bagger. Rarely (and I mean rarely) do I concern myself with the day to day pricing of these type of investments, I just don’t care.
2 Real Life Examples
1. I’m actively buying Uranium Energy Corp (UEC), I’ve purchased it 2 times in the past month and plan to purchase more today.
- Their commodity is undervalued
- Sector is hated
- Business is solid (low cost producer & expanding resource)
The person running UEC is Amir Adnani, I trust him, know him, and would gladly give my money to him in any venture he decided to pursue, which makes UEC an easy one for me.
My personal objective: Accumulate UEC while uranium is under $60 a pound, currently it is at $42.25. As Amir developes this company, I may decide to sell some in a few years, but I won’t even consider selling until uranium is trading for over $80.
2. I have a core position in Canarc Resource Corp (TSXV: CCM), last December I was lucky enough to be invited to make a private placement into CCM, which I happily did.
- Good gold exploration company shares are extremely undervalued
- CCM has 1 million ounces of gold
- Is led by a very successful CEO Bradford Cooke of Endeavour Silver
Like with Amir, Bradford Cooke is someone who I have had the chance to get to know in person, he has my highest confidence in his ability to build a mining company and most importantly I trust Brad. Everything he has told me has happened, from our business relationship which has been a year running, to his timeline in getting a deal done with the New Polaris project.
My Personal Objective: Accumulate CCM until Bradford Cooke closes a joint venture on New Polaris as well as acquires a producing gold mine. From there I will likely just hold my shares as Brad builds his second billion dollar mining company.
Conclusion: It is fun building a business and it is even more fun getting rich. So find a few key companies that you can become an active shareholder in and forget about the day to day price, know the business since you own it and plan on selling it when certain objectives that bring value are achieved. Most importantly focus on the value of the business and its objectives first and don’t obsess over the share price.
I’ll try and cover a few larger caps in the next 7 days that I am buying, ones that pay dividends and that are undervalued.