Chief Investment Officer, Steve Johnson, provides insight into two of the top lessons to come out of the GameStop saga.
Hi everyone and welcome. It’s Steve Johnson here, Chief Investment Officer at Forager Funds, fresh back from a nice little holiday up the north coast of New South Wales, where I was able to watch the GameStop saga from a nice distance, provided a lot of entertainment over a few weeks there, but also provided some very interesting lessons.
Number one, in this investing business you never, ever want to be a forced seller. I watched all of the stories of hedge funds been squeezed, forced back to buy back shares in a company that they were very aware of being overpriced. I didn’t feel too sorry for them to be honest with you, but they had just reiterated this lesson that being forced to do something is one of the short ways of being guaranteed a loss in investing.
I’ve always thought that was true about margin lending as well. That product is almost designed to force you to sell at the worst possible time. And it’s one of the things I love about investing long-term and not having leverage against our portfolio or our investments. Nobody can ever force us to sell.
The second interesting insight into what’s been going on with GameStop is just the fact that we are actually all so interested in it. Why is that? It’s a company that most of us have never heard of causing a lot of damage to a hedge fund that most of us have never heard of. Sure it’s an interesting story, but we’re also very engaged when we see someone else getting rich faster than us.
I think that’s a really dangerous emotion in the share market. Sure, you can be interested and read some interesting stories, but one of the secrets to success here is to really focus on what you’re doing on your own backyard and what your objectives are out of life. If you’re sitting there trying to generate a 6-8% return out of a long-term portfolio, you really shouldn’t care that some millennial is making hundreds and thousands of percents out of a little stock that’s listed over in New York.
The millennials say YOLO with all of their trades, you only live once. My wife says that is true, but you do live for a very, very long time and being worried about other people making more money than you is a sure way to make it seem a hell of a lot longer.
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.