Vol II, No. 7  

August 2014   

 

 

A monthly commentary for investors and their advisors about how the quirks of human behavior

drive investing...and what you can do about it

 

 

The Misbehaving Investor
     

We all have a natural inclination to favor sunny days in the investment world with continually upbeat quarterly earnings reports. 

 

Yet it's the blustery, rainy days that bring opportunity.  As market traders run in from the storm, they occasionally leave worthwhile investment ideas behind - at attractive prices.

 

John Feb 5  

John Heldman, CFA

President


Dave Hutchison, CFA
Managing Director
About Us

Triad Investment Management manages equity and balanced portfolios with a focus on Research, Behavior and Ethics.  We invest in companies with a business-buyer's perspective.  Founded in 2008, Triad is a 100% employee-owned SEC registered investment advisor.  Learn more at www.triadim.com

 

Triad has $139 million of assets under management as of June 30, 2014.  The Concentrated All-Cap Equity composite return, annualized and net of fees since inception, is 13.0% vs. 8.2%  for the S&P 500 Index  (April 30, 2008 to June 30, 2014). 

 
Contact
:
(949) 679-3991
dhutchison@triadim.com



 
 
Triad Small 1-24

Pray for Rain 

 

California, along with many other parts of the country, is experiencing a severe drought.  The state's major reservoirs are at 60% of capacity.  Agriculture, consumer of 80% of California water, is reeling.  Celebrities like Conan O'Brien and Lady Gaga are doing public service announcements urging Californians to conserve water.  Fun fact: California almond growers consume enough water each year to supply 75% of the water used by all California households.  Scientists speculate that we could be in an epic 150-200 year drought cycle.  If so, we might spend the rest of our lives praying for more rain. 

                         

Yes, there is an investment angle here.  As I left the office last week and headed for the elevator, an alert popped up on my cellphone.  It's a stock market app that I use to keep track of prices while I'm mobile.  The message was company X - can't mention the name, as we might buy more - was going to report earnings tomorrow, blah, blah blah.  We don't pay a lot of attention to quarterly earnings, but I found myself saying "I hope company X reports lousy earnings so other investors will get impatient and dump the stock".

 

Why?  We had been buying the stock and didn't get a full position before the price moved upward.  And just like tomatoes, tires or Tommy Bahama shirts - still popular, right? - we prefer to pay less when making purchases.  And since the stock market is efficient and sane most of the time, and only occasionally nuts, we usually get the best opportunities when investors go temporarily crazy because of short-term issues.

 

So we pray for rain, a special Wall Street variety that occasionally gets dumped on companies who dare to disappoint the denizens of lower Manhattan.  And unlike fickle Mother Nature, Wall Street can be relied upon to provide periodic rain storms to companies that dare to disappoint.  When rain hits a company we admire, we'll be positioned with a large bucket to catch the downpour from nail-biting investors who aren't mentally prepared for occasional storms-meaning a lack of patience to wait for the clouds to depart and sunshine to emerge.

 

 

Mentally, it can be tough to buy what others are selling.  It requires enough knowledge to reject the "herd mentality" that can push share prices down and a cast iron stomach to ignore the flood of sell orders.

 

Buy low, sell high.  Easy to say.  Tougher to do.  Especially when it's raining on Wall Street.  We're currently experiencing a drought of buying opportunities in the markets, and like Californians everywhere, we are praying for investment rain.


-John Heldman, CFA
 

 

Past performance is not a guarantee of future results.
Results are presented net of fees and include the reinvestment of all income.

     

2014 Triad Investment Management, LLC