- the source for market opinions


February 5, 2019 | 10-Baggers: What It Takes

Lobo Tiggre, aka Louis James, is the founder and CEO of Louis James LLC, and the principal analyst and editor of the Independent Speculator. He researched and recommended speculative opportunities in Casey Research publications from 2004 to 2018, writing under the name “Louis James.” While with Casey Research, he learned the ins and outs of resource speculation from the legendary speculator Doug Casey. Although frequently mistaken for one, Mr. Tiggre is not a professional geologist. However, his long tutelage under world-class geologists, writers, and investors resulted in an exceptional track record. The average of the yearly gains published for the flagship Casey publication, the International Speculator, was 18.5% per year during Tiggre’s time with the publication. A fully transparent, documented, and verifiable track record is a central feature of services going forward. Another key feature is that Mr. Tiggre will put his own money into the speculations he writes about, so his readers will always know he has “skin in the game” with them

When resource markets are on a tear, investment gamblers who think they’re speculators are keen to jump on the next exciting story they hear. Some people are booking huge profits on 10-baggers (stocks that go up 1,000% or more). Yes, that really does happen when commodity prices are booming. I’ve seen it many times in my career. And when it does, everyone wants in. The fear of missing out drives market darlings to ridiculous valuations.

At such times, I’d often start a talk at an investment conference by asking for a show of hands: “How many of you want a 10-bagger?”

Most of the people in the room would put their hands up.

Then I’d ask: “How many of you are willing to make more losing trades than winning trades?”

Only a few hands would go up. One of those would be Rick Rule’s, if he was in the room.

Then came the punch line: “All of you who held up your hand the first time but not the second time aren’t willing to do what it takes to bag 1,000% gains.”

Think about it. If you’re going to swing for the bleachers more often, you’re going to strike out more often. But if you’re good at picking the right balls and executing on your swing, the occasional home runs more than make up for the strikes.

Suppose you speculate $10,000 on higher-risk, higher-reward junior mining stocks five times this year, and get the following results:

  • -30%
  • +100%
  • -50%
  • +1,000%
  • -100%
  • Average: +184%

As you can see, despite having more losers than winners—even including one total wipeout of 100%—the average result is still a terrific triple-digit gain. The $50,000 invested turns into $142,000.

The math supports swinging for the bleachers if you’re a Babe Ruth among investors. But, obviously, most people are not.

Consider that in the real world, it would be likely that all of my five examples above would be in the red at some point. Stocks almost never take off the day you buy them without ever looking back. But we don’t know which ones will end up winners until after taking substantial losses on the losers.

You have to ask yourself—and it’s vital that you be honest with yourself—if you could stay with the trades if you saw all of your speculations dropping sharply.

That’s what it takes.

If your answer is no, don’t worry. You can still make a lot of money speculating on less risky picks. But you should accept that you’re not as likely to make home runs, because you’re not taking the risk of swinging for the bleachers.

If your answer is yes, that’s fine—but you don’t get to whine about taking losses… a lot of losses. You must accept that you have asked for them. They’re the price you pay for going after 10-baggers.

In either case, I have stock picks in The Independent Speculator portfolio that I think have excellent odds of delivering.

You can, of course, go it alone. Just do so with your eyes wide open about what it takes to land 10-baggers.

Caveat emptor,

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the Weekly Recap.

February 5th, 2019

Posted In: Louis James

Post a Comment:

Your email address will not be published.

All Comments are moderated before appearing on the site


This site uses Akismet to reduce spam. Learn how your comment data is processed.