The skill of “crisis investing” – more important than ever before

The skill of “crisis investing” – more important than ever before
16 October 2020

A stock price gain of 107% in a single day – how’d you like that?

Back in April 2020, I published a research report exclusively for my Lifetime Members. The report investigated a micro-cap stock, and a very speculative one at that.

Yesterday, its intraday peak made it the #1 top performer of the London Stock Exchange.

Why the sudden jump?

Because, among other things, COVID-19 has turned into an opportunity for the company in question.

Let me explain.

All-new investment themes

It’s now been seven months since much of the world went into coronavirus meltdown.

During the first half-year of the global pandemic, most companies (and individuals) were busy dealing with immediate emergencies and figuring out how to adjust to the new situation.

The craziness continues, but there is now another trend starting to become apparent.

Out of all this, entirely new, non-obvious investment themes are emerging – alongside the apparent ones such as vaccine makers, manufacturers of rubber gloves, and digital businesses.

I have made it my mission to find more of the non-obvious opportunities and introduce them to you before the wider public wakes up.

Yesterday’s top gainer of the London Stock Exchange is a good example.

National self-sufficiency is back on the agenda

The company that made the headlines yesterday is GCM Resources (ISIN GB00B00KV284), a minnow of a company that owns the rights to a highly controversial, massive coal reserve in Bangladesh. It once lost 99% of its value and has since been rumoured to be a candidate for turning into a 100-bagger if the situation turned around.

For GCM Resources, the current situation may yet turn into a game changer.

Up until the global pandemic struck, everyone had worked on the assumption of an ever-more globalised world. How to deal with an energy shortage in Bangladesh? The answer seemed to consist of importing gas from nearby countries and buying foreign technology to invest in renewable energy. Indeed, in a world of open markets, no one would have any reason to use the “dirty” coal that the country already owns. Instead, the solutions could be sourced abroad.

Such an approach has become riskier. Around the world, you can see governments getting back onto the idea of national self-sufficiency. We now live in a time when borders can be closed at the drop of a hat, flights stop operating, and global supply chains can be interrupted for months on end. As of now, there is no end in sight to all of this.

Why make yourself dependent on solutions that require the cooperation of other countries? When everyone is fighting for their own survival, how much support can you expect from abroad?

If you were a politician, could you justify to make your electorate's day-to-day life dependent on foreign lands?

GCM’s controversial coal resource is suddenly getting new attention because coal is a domestic resource – entirely within control of the country’s government. Never mind the fact that it’s also cheap – another factor in a world where people are struggling to make ends meet because economies are in lockdown meltdown.

Needless to say, this thesis is not without its contradictors.

Some observers claim that Bangladesh will, after all, switch to increased use of renewable energy right away.

Yet others claim that salvation does lie in importing gas from nearby countries.

Also, there is a credible case for saying that GCM was currently talking up its own book, and that Bangladesh turning to a different energy policy was a hallucinatory fantasy.

Indeed, any discussion about energy policies inevitably descends into the usual quarrel about all the subjects that are connected to energy policies. It’s a hot-button issue, and if there was any certainty, the stock price of GCM would already be up ten times by now (instead of its much smaller spike yesterday).

However, for now, at least some market participants are giving credence to a possible new focus on national self-sufficiency in Bangladesh’s energy policy. It’s not an unreasonable question to ask if Bangladesh might indeed change course to adjust to the “new normal”. We all know that politicians are only too happy to ignore their statements from yesterday and take the exact opposite position, if they feel that it will win them votes.

And in any case, it’s just an example of themes that no one would have thought much about a year ago, but which now require our attention.

To go from a pandemic to de-globalisation to a London-listed microcap with a politically controversial coalfield in Bangladesh is the kind of non-obvious investment idea that I was mentioning earlier.

Unlike vaccine makers, this one doesn’t exactly jump right at you.

It takes a bit of research to find it.

This is what I have been working on these past few months. Whereas the stock prices of vaccine makers have already had an incredible run, the stocks to play less obvious ideas could still have such leaps ahead of them.

What’s more, I hugely enjoy researching subjects that seem a bit off-the-wall when I first look into them – but which have a chance of going mainstream in the foreseeable future.

Shifting gear and adjusting focus

Like so many others, my pre-pandemic research included many businesses that got hit hard.

Airlines, inner-city leisure real estate, a highly leveraged energy producer – my past reporting had included all of those. Clearly, these were the wrong businesses to be invested in when the world went into lockdown. I got it doubly wrong when I assumed (read: hoped!) that we’d get out of the pandemic during summer.

However, that was then, and the only way is forward.

I don’t just want to make up for the portfolio damage, but actively turn the new situation into a money-making opportunity.

As we all know, from crisis stems opportunity.

Over the past two months, I've been a bit quieter than usual but far from inactive:

  • I've researched a book that I'd long planned to write. Many of you have asked me over the past two years if a new book was forthcoming, and I finally decided to set a bit of time aside and deliver on this popular request. Watch this space!
  • I've gone on a quest to find investment topics that are not yet widely discussed, and which may give you, my readers, an edge.
  • I've educated myself about areas where I wasn’t knowledgeable enough, and which I see as vital for the coming years – mostly in the area of innovative, tech-related fields.

I am also going to shift my investment approach somewhat. Whereas in the past, I've had a stronger slant towards old-style value investing, going forward, I'll try harder to find a combination of value, growth, and yield. This will include finding stocks that tick at least two of these boxes, ideally three (when I can find such a unicorn).

Does that sound like an all-in-one investment that is too good to be true?

Those of my Members who read yesterday’s update about GPW (ISIN PLGPW0000017), the operator of the Warsaw Stock Exchange, already know that such exceptional situations do exist. GPW does tick all of these three boxes (and my Members could be well-advised to take another look at the 52-page research report that I published in July 2020).

My Members also got a taste of my revised approach through reports on companies such as:

  • Fiverr (ISIN IL0011582033; April 2020 report)
  • Helios Towers (ISIN GB00BJVQC708; May 2020 report); or
  • Tobii (ISIN SE0002591420; August 2020 report for Lifetime Members only).

Changing times require a changing approach, and I have been getting ready for it.

As part of that, expect a few new themes and subjects in my research reports between now and year-end.

An outlook on what’s to come

I tend to shy away from divulging what I am working on until I've written and edited the last sentence of a new report or article.

Whenever I write something, I always keep an open mind. Occasionally, I might come to a different conclusion than the one I've had in mind originally, and have to tear an advanced draft into shreds and abandon my entire idea. If I mentioned them in advance, I would have to backtrack and cancel a publication that readers were already waiting for.

Today, I am making a rare exception.

As a teaser, here are some of the questions I have been researching over the past couple of weeks:

  • What will happen to investments in US social media companies if “Section 230” was binned? (If you don’t know what that the hell I am talking about, keep reading my Weekly Dispatches!)
  • If energy was eventually “for free”, who would benefit the most?
  • Is “Economic Nationalism” an emerging investment theme that you should pay attention to, and could an entirely new asset class emerge from it? Will there be a popular new acronym coming out of it, like BRICs (emerging market boom early 2000s) or today’s FAANGs? If so, what could it be?
  • Is there at least ONE asset class that allows you to stay financially solvent if the world temporarily moved to a dystopian combination of universal basic income, social credit scores, and a ban of cash?
  • If war once again came back to Continental Europe, which companies would you need to be invested in?
  • Speaking of war, what do wars nowadays consist of anyway? Do shots need to be fired or does cyber-warfare constitute a legally valid declaration of war? Do the markets underprice the risk of a conventional, major “hot war” breaking out in some part of the world? Is the world already at war without us realising?
  • Could “COVID-19” be the new “War on Drugs”, and how can you make money off it if it were to stay around for 30 years?

Some of these themes will be a bit experimental. I do want to push boundaries by asking questions that few others are asking, because thought experiments are fun and can lead to valuable conclusions. (I even enjoy readers sending me their arguments aimed at deconstructing my theses, because I have incredibly smart readers in all parts of the world.)

Yet others are good to go as a new investment theme but have remained underexplored by investors so far.

They all relate to a crisis of some sort.

All of them have multiple opportunities wrapped into them.

And they are coming your way over the next few months.

What you can/should do next

If any of the questions and themes touched on above sound interesting to you, then stay tuned.

Also, if you haven't already, you might want to take a moment to consider what Membership level is best for you. (Spoiler alert, marketing pitch coming your way! Stop reading now if you are sure that just reading my Weekly Dispatches means you are not missing out on anything at all.)

Right now, you are reading the weekly missive that I publish for free. Some say that it’s more extensive and valuable than many products that you need to pay for.

However, my Weekly Dispatches pale in comparison to the in-depth research reports that I send to my Members - ten times a year, with each report containing between 20-100 pages. As I like to describe them, these are my best – and certainly, most interesting – ideas. Four more reports are scheduled to appear between now and year-end. Membership is a snip at USD 49 per year – about 10-20 times less than what other websites charge.

Yet others may find that the Lifetime Membership suits them best. It’s one payment to get complete access to all my writing from now until I kick the bucket. That includes access to exclusive content – my Lifetime Members get an additional four reports a year on small-cap ideas, such as the report about GCM Resources (which could be a 10, 50 or 100-bagger if the speculative investment thesis works out). One more such report will be released before the end of the year. Lifetime Membership is available for a one-off payment of USD 999.

Whatever Membership level you might choose, there are a few exciting months ahead.

I am now holed up on Sark again with oodles of time to turn research and ideas into writing. As I said before, watch this space for more – and don't let false economy make you lose out on some very promising opportunities!

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Recap: Poland investor trip

30 readers joined me in Warsaw last month to learn about Polish equities.

Over a packed four days, we got a deeper understanding of the Polish market, looked at several promising companies, and enjoyed some local experiences as well as networking with likeminded individuals all at the same time.

If you couldn’t make it, here’s your chance to catch up. Check out my updated event webpage for all the details. 


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