Introducing Stability & Opportunity: Research That Makes A Difference

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Includes: AIRR, BBC, BBH, BBP, CNDF, EMTY, FBT, FCOM, FDIS, FIDU, FTXD, FXD, FXR, GGT, HQL, IAK, IBB, IFLY, INDF, IYJ, IYZ, JHMC, JHMI, KBWP, KIE, LABD, LABS, LABU, LTL, PBE, PBS, PMR, RCD, RETL, RGI, RTH, SIJ, UBIO, UXI, VCR, VIS, VOX, XBI, XLI, XLY, XRT, XTL, ZBIO
by: Early Retiree
Summary

Conceived to be different from the ground up, I am launching "Stability & Opportunity": not a marketing vehicle, but a research engine.

The service provides access to all my ongoing notes, work in progress, investment ideas and sources.

Subscribers basically will take part in my treasure hunt and watch over my shoulders as I do the heavy lifting.

As my followers are used to, solid long-term holdings provide stability, while more speculative short-term opportunities juice returns.

(Editors' Note: This article is meant as an introduction for Stability & Opportunity, a new Marketplace service by Early Retiree.)

Please, not yet another newsletter!

Personally, I have always thought I would never subscribe to an investment newsletter. Therefore, I would have never written one.

So here is the dilemma: While I have been publishing on average just one single article per month, my followers keep asking me for more. I almost daily receive messages asking for advice. And I have written over one thousand pages of unpublished research notes in 2017. My portfolio has changed substantially. I've made money in the automobile sector, in cosmetics, animal health, sold some of my long-time favorites and shared very little of this activity.

So why don't I post more articles? For several reasons:

  • It is against my own interest as a buyer to inform the general public about market inefficiencies.
  • The more you've worked for it, the higher you value your knowledge.
  • I don't make my living by writing on investing but by investing. Therefore, I try to keep my notes as short as possible, and I hate repetition.
  • Editorial review times cause delays, which make timely alerts impossible.
  • In my experience, the best ideas get easily ignored anyway (see below).
  • Public articles are often not the right place for speculative or critical thoughts on companies I want to succeed.
  • Writing the usual pitches feels like giving my readers a nice glass of water before sending them into the desert.
  • In my view, a pitch is not a result - it's where the real work should start, not end.

However, complex issues require complex reports and frequent, timely updates and integrations, for which SA's usual article format is not practical.

What kind of investor are you?

Are you blindly following your trusted experts? Do you rapidly scan pitches for the conclusions so you know at which price you should buy? Does it make you mad when others sell short your favorite holdings and publicly discuss their short thesis? Are you always eager to find and comment on posts that confirm your own bias?

Well, then you should not follow me, nor consider subscribing to my new Marketplace service.

"Stability & Opportunity" is not about throwing out the most convincing pitches. It is about work: research, doubts, honesty, accurate thinking.

Behind S&O, there is the steadfast belief that specialization pays off, that by digging deeper and deeper you can get an edge, that focusing on only a few stocks increases an investor's chances to be right against the market. S&O subscribers should be more eager to learn new counterarguments against their own thesis than to be comforted by the echo of their own beliefs again and again.

Stability & Opportunity is not for those who want to avoid efforts, it's for those who want to save time. My goal is to enable subscribers to do all the necessary, staggering amount of work in the most efficient way.

What is an analyst's job?

Many believe an analyst's job is to build models. Models of reality - reliable, predictable models.

It is actually much more complicated. The problem is as old as humankind:

(Source)

In Plato's famous Allegory of the Cave, a group of people "have lived chained to the wall of a cave all of their lives, facing a blank wall. The people watch shadows projected on the wall from objects passing in front of a fire behind them, and give names to these shadows. The shadows are the prisoners' reality."

The prisoners are building a model of a world they actually never see. It's a tough job, but oftentimes it seems easy. There is broad consensus about how to interpret some shadows - yet, no guarantee that this interpretation is correct. Although it actually doesn't matter as long as there is no fundamental change.

Plato's allegory became famous because of its versatility: it actually is a model of reality itself. However, it only remains an attempt. There is broad consensus about the truth it tells, but no certainty. Only a god could know.

So what is an analyst's job? It's not only to build a model explaining and forecasting the movements of the shadows/figures/businesses he sees. He has to build another model as well, similarly to what Plato has done: he has to model what his fellow analysts/prisoners see and why - and what they are getting wrong. So it's a complicated job and wrought with traps. Analysts better know that there is virtually no chance they are 100% right, and that the greatest risk in investing is the one you didn't see coming.

Therefore, Stability & Opportunity subscribers will not only know what I know, but also what I don't know. I don't plan to appear omniscient.

The best ideas? Ignored.

Rather unsurprisingly, in my years on Seeking Alpha, some of my best short-term ideas have been read only be very few people and drawn zero or close to zero comments. Evidently, I was looking at shadows that were just too obscure.

In these cases a simple, single pitch was just too little to ring the bargain bell. As an S&O subscriber, you won't miss such ideas anymore, as you will watch over my shoulders as I discover the idea, investigate, jot down first estimates, formulate a rudimental thesis and finally decide to buy. You will also see how my thesis evolves as events unfold.

In-depth research

Even though I am also a biotech investor, I don't believe I need to have an opinion on every biotech out there. Effectively, I have strong opinions on just a minuscule part of the healthcare sector. As many of you know, I like to investigate these ideas thoroughly and used to publish in-depth reports on single pipeline assets on a different site (pay per view). However, over time this system became not very practical, as frequent updates were necessary.

In the future, S&O subscribers will get immediate access to all my in-depth reports and all necessary updates.

Investment universe

I have invested in insurance, industrials, biotech, retail, telecom and media, buying opportunistically what I believed to be cheap. I don't buy what I don't understand. Ideas can be sourced in all major international markets.

My followers know that I live off my investments and am therefore deeply risk-averse, but don't consider price volatility to be indicative of risk; on the contrary, I try to profit from extreme price swings. (Which cut both ways, as I could appreciate in these sell-off days. While some of my stocks went down with the market, another holding tripled in January, one was bought out and another two rallied between 15% and 20% in a single day; so overall, I survived the volatility storm relatively unscathed - at least until today.)

A major part of my portfolio is usually allocated to large long-term positions in companies I know very well. Most of these businesses are underfollowed or complex. All of them have several layers of safety built in, which may be a combination of a low price-to-value, a high probability of market inefficiency, several roads to success, a safety net like a liquidation value above the current price, high-quality management and/or investors, or other intricate mechanisms leading to safety of principal.

Stability & Opportunity gives you access to my notes, regular commentary on transcripts, filings and press releases, source documentation and valuations of all long-term holdings.

In addition, my Research Log Book is updated several times every day on average, and offers the greatest possible transparency on what I'm currently working on. Watch new investment ideas as they take shape or get killed. See the trails I am following and how I investigate new ideas. See what I know and what I don't know. Learn about potential threats to my thesis.

In addition to long-term, end-to-end, in-depth coverage of selected picks, I frequently alert my subscribers to short-term opportunities such as the ones mentioned above or to temporary market inefficiencies in long-term holdings. Acting rapidly on these alerts can significantly enhance returns.

A vibrant community

Why am I launching this service? Simple: I have always appreciated other investors' intelligent feedback and hope to get as much of it as possible inside the Seeking Alpha Marketplace platform. S&O subscribers will also get access to our internal chat function, which will enable us to convene virtual conferences on specific subjects or events. Subscribers can get in touch with each other or with me at any time.

S&O hits the ground running

There are already close to 200 pages of exclusive research on S&O: not only my most recent ideas I have never published anything about, but also some in-depth reports related to my long-time favorites. Early subscribers already get the full package: solid long-term holdings provide stability, while more speculative short-term opportunities juice returns. Feel free to join and take a closer look. Given the substantial amount of research already available at launch, I have decided against a free trial option, but thanks to Seeking Alpha's unconditional money back guarantee, there is nothing to lose.

Early annual subscribers will get Stability & Opportunity access for $2/day - a more than fair price for the effective output of a full-time research analyst, ~40 hours of work/week, 16 years of investing experience of an SA PRO author and SA Contest Winner, access to all my ongoing research notes, sources and documentation, including access to all my paywalled SA PRO articles. Once a critical mass is achieved, the subscription price will go up substantially, in order to keep the community small and focused.

Interested?

Even more information on Stability & Opportunity can be found on the subscription page.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.