by Travis Johnson, Stock Gumshoe | September 13, 2019 1:15 pm
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Source URL: https://www.stockgumshoe.com/2019/09/friday-file-another-huge-dividend-jump-inspires-buying-plus-gold-and-bio-nibbles/
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New “irregular” here; Travis, can you do a discussion on the role of preferred stock in a portfolio ? When do you hold the common stock, the preferred stock or a combo of the two ? And can you use Innovative Industrial (IIPR) and IIPRPRA as an example. Thanks !
I’ve written some about IIPR preferreds specifically in the past, will try to share an update fairly soon. Thanks for the note.
Trade Note:
Some stop loss news today… I stopped out of my small position in Lightspeed POS (LSPD.TO, LGHEF), which has only been in the portfolio for about a month but tripped my stop loss trigger around $25 on yesterday’s close.
Why? Well, my general philosophy with stop losses is to use them for momentum names when I have no confidence in the “floor” for the stock or in any particular valuation support. That’s because the stop loss signals to me that the perception of the story has changed… and if that’s the case, the stock could fall dramatically further since these momentum/growth stocks that are trading at 20-30X sales are valued almost entirely on the story and the share price momentum, and both story and momentum can turn completely around in a very short period of time even if the fundamental operations of the company are steady.
Lightspeed is a new stock, and I don’t have any real conviction that it will be a market-beater over the long run… it’s very much a momentum bet that an upstart cloud company might catch fire and get on a string of “beat and raise” quarters to get everyone excited. Given my lack of conviction in the future greatness of the company and the rich valuation, selling on the stop loss just makes sense… there’s no valuation reason why the stock can’t just drift down by another 20-30% or more as the market tries to guess at their future earnings potential. It could also get a dual listing in NY and soar 50% in excitement if investors are inspired to lust after cloud stocks again going into the end of the year, of course, but I’ll take my signal here and get out for now.
I have also posted a tighter stop loss on the portfolio page for Shopify (SHOP) in the past year or so because of my concerns about valuation — I’ve been watching a 20% stop loss for that stock, while the VQ% stop loss suggested by TradeStops is much looser at 36%… and Shopify is extremely close to that 20% stop loss level right now (that would be $325.59 for a closing price, and it’s about 1% below that in the afternoon as I type, falling most recently because of a secondary offering). So I am beginning to think over my reaction to that for Shopify, assuming it happens, and could well sell some or all of that position in the next few days. The looser VQ% stop loss, for those who think it makes sense to give this high-flier more room, would be $258.77 right now.
Whether or not a stop-loss sale ends up making sense in any given situation will depend, of course, on the future — if Lightspeed resumes its growth and investors fall fully in love with that growth potential, then selling at $25 will likely look stupid at some point in the future. If I send up selling some SHOP shares somewhere near this price, and in ten years Shopify really is the “next Amazon” and rises in value 10X again, well then selling SHOP after a 300% gain today would look short-sighted. That’s the emotional dilemma that plagues anyone selling any stock, and it’s important to have some discipline as you make your portfolio decisions.
I’m not willing to commit to “always sell on a stop loss” with every position in my portfolio, but I will always look at a stock and re-evaluate it when the stop loss trigger is hit… and in cases where the stock does not have a defensible valuation (“would I buy it near here” is a good test), or I’m not extremely confident about the future prospects, I’m likely to sell those shares.
The key, of course, is not to let a stop loss pull you out of the market entirely — my cash balance is already growing, and I like having cash in hopes that we’ll see meaty buying opportunities in some near-future downturn, but I don’t want to be 30% in cash and therefore implicitly betting that we’ll have a market crash soon… so I’ll keep looking for reasonably priced opportunities or interesting speculations.
Travis, I’m a newer Irregular… how would you recommend starting to invest in gold royalty as of today? I see in the Real Money Portfolio you own a few. As of now I only GLD. Should I start with a position in SAND, or diversify and split it amongst SAND, OR, and EQX? Which are the best buys right now? I apologize if its a noobie question, just looking for a good 1st step. Thank you!
I can’t tell you what to do, but I’d say that I think Sandstorm is my favorite for its combination of good valuation and big future growth prospects (assuming you have some confidence that Hod Maden will be built in the next few years), and Franco-Nevada is clearly the class of the bunch and the one that always trades at a richer valuation than the others (and it’s also the one that tends to be bought first by institutions, which helps in gold bull markets)… but it has earned that right to be the priciest. Osisko is riskier because of the huge reliance on one mine, but I bought some shares recently.
If I were starting today I’d probably go 50/50 with Sandstorm (SAND) and either Franco-Nevada (FNV) or, if I couldn’t stomach that valuation, Wheaton Precious Metals (WPM), but it’s hard to be honest with yourself when thinking hypothetically… the only really pure expression of my sentiment, I suppose, is that SAND and OR are the only two I currently own, and SAND is by far my largest gold position.
Travis: a non-investment comment.
When I click on the “Read more >>” link to read the rest of a longer posting, I can no longer add a Thumbs Up or Reply to the posting in question. The new length of the posting magically disappears that useful facility.
Yes, I can click Refresh and bring the original shorter posting back, but that seems an unnecessary step.
Cheers, Penny
Thanks for letting us know.
Hi Travis: You should perhaps reassess your thinking on Cryptos. Open up an account at Coinbase and buy 3 currencies Bitcoin/Ethereum and Chainlink. Just commit $1,000 in total $400/$400 and $200.
The timing is perfect – for the last 4 years I have just ignored the matter – our world is changing and we need to acknowledge that fiat currencies have failed us.
For the record I have put my money where my mouth is – so we will achieve success or failure together.
Thanks Travis for all your hard work – you really are the best.
Blairgowrie