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Invest With A Passion

When I was 11 years old I swung my first golf club, and I was hooked. It was my passion. At that very minute my love for soccer ended. I remember thinking even back then, “How long can I really kick this ball around for? What? 10 years tops? This

When I was 11 years old I swung my first golf club, and I was hooked. It was my passion. At that very minute my love for soccer ended. I remember thinking even back then, “How long can I really kick this ball around for? What? 10 years tops? This is a waste of my time. Now golf is a game I can play until I’m 80 years old. This makes sense to me”.  

The problem was that I was 11 years old and golf cost money. I saved up enough money from mowing lawns to buy a used set of golf clubs, but chipping around the backyard got old really fast.

Our neighbor was a farmer and his barn (with a metal roof) was about 160 yards away.  When I got bored of chipping, which happened more and more regularly, I would tee up my driver and aim right for that barn. I would swing as hard as I could, and as soon as I made contact, turn and run to the other side of the house and wait.

A few seconds later, “Crash!!”, the golf ball would hit the tin roof and make a horrendous noise. On several occasions I’d see the farmer run around from the other side of the barn looking upward not knowing what had happened. I would laugh and laugh.  I didn’t think the farmer knew what was happening. Then one day the farmer stopped by while I was mowing and handed me a bucket with 30 or so golf balls in it. He surprisingly wasn’t that angry except for a stray drive that came inches from hitting his wife who was tending to the garden. I decided to stop such activity. 

Soon after I started playing once per week at an executive course (a 2/3 scale course) about 4 miles away from my house. I would get up early and try to get all my work done as soon as possible so I might be able to convince my Mom to drive me to the course. Maybe 25% of the time I would convince her.

On one day in particular I wasn’t going to take “No” for an answer. In fact as soon as my Mom said “No”, I ran out to the garage, grabbed my golf clubs, hopped on my bike and started peddling. The golf bag was very heavy (I was only 11 years old) and awkward (before backpack straps). I made it about a half mile before the bag fell off my shoulder onto my back tire and I careened off the road crashing into a field. I brushed myself off and made it a bit further. I don’t remember how many times I had to stop but it was a lot, but I had made it to the course. On that very day I would make my first par on a hole. I remember it like it was yesterday.

Charles Barkley (in video above) loves golf but also has the absolutely worst golf swing perhaps, ever.

When you first start golfing you’re not sure exactly how to play but you know you want to play. Your swing is some primitive homemade concoction you’ve pieced together from other sports you played like hockey or baseball. The most used words during the first rounds are: topped, chunked, duffed, sliced, worm burner, out of bounds, in the water, etc. It doesn’t matter though because it’s the passion that drives you. You don’t remember the 111 bad strokes you had during the round, it was that one drive on #16 that you hit pure that went right down the fairway, or that one putt you made from 30 feet to save triple bogey. Over time though you start thinking about the bad shots more and more.  It’s the golfers with a real passion that will succeed.

Passion is a powerful. It gives you the drive and courage to do amazing things. The best thing passionate people do well is not give up. They have the ability to shrug off failure and not dwell on it too much. They use failure as motivation, not an excuse to give up.  It’s also why these people go to amazing lengths to become the best at what they do.

There are numerous parallels between golf and investing. When you start off investing you need to be like a new golfer, shaking off the bad shots and using them as well as the good shots as motivation. The key though is keeping that passion.  

My passion is microcaps. I get asked quite often from new investors, “Can you teach me how to invest in microcaps?”. 

My response is normally, “The first thing you need to do is lose all your money and then let me know if you still want to learn.”

I’m not really joking either. The valuable lessons you only learn by losing your own money. Your psyche needs to be tested. Your emotions need to reach a breaking point. Most people give up, but there are those where failure motivates them to work harder. If you are the later you will do very well.

I think it’s human nature to want to do things your own way and not really listen to advice.  For many of us it doesn’t matter what you read, who tells you to invest this way or stay away from these things, you won’t learn until you lose your money. That is how I was.

I was especially pigheaded early in my investing career, and I didn’t like to listen to other people’s advice. I lost hundreds of thousands of dollars learning the hard way. But every time I got knocked down I bounced back, and every time I got knocked down I learned something.

Most great golfers have the uncanny ability to forget bad shots. In fact they have a statistic for it, the bounce-back percentage. It is the percentage that a player making birdie or better on the hole following a bogey or worse. Luke Donald currently has the highest bounce-back percentage at 30.99%. When he has a bad hole, 31% of the time his next hole will be a great one.

Early in my investment career I chased everything that glittered and sparkled paying very little attention to management. Pain, destruction, and loss followed.

I would not be such a strong believer in betting on the jockey not the horse if it weren’t for my losses:

Invest in Great Management: Mediocre-Bad management teams are the biggest destroyers of shareholder value. They can turn something amazing into something worthless quicker than you think. A great management team can turn something worthless into something amazing. Never invest in a company because of an underlying asset, IP, technology, etc. Invest in great management. 

Like everything else I think it’s important for new investors to realize investing is a life long educational process. Tiger Woods is great partly because he has the genes, but also because he started playing as soon as he was out of his mother’s womb. I started investing when I was a teenager, so I’ve had much more experience (experience = losing money) then my age implies. To be a good investor, it just takes time to go through the necessary experiences.

Personally with my own investing, I have to watch out for another demon now, one I’ve seen creep into the psyches of many experienced microcap investors and fund managers. You often here golf commentators say, “Wow look at that putt, to have the nerves of a 20 year old, just fearless”, after a young golfer makes a putt in a pressure situation.  This “ fearless nerve” is because the golfer is young with not many battle scars, not many responsibilities, probably no wife or kids or major bills. He/she plays like they have nothing to lose because they really don’t have anything to lose. As the golfer ages they take on more responsibilities, start thinking about the money, endorsements, and maybe wife and kids also enter the picture. They lose the fearless edge. They have something to lose now.

I see this happen with investors too. After you experience so much it’s easy to become too cynical, non-trusting of everything, so risk averse it paralyzes you. You’ve built up capital through the years and you get more and more conservative and can’t pull the trigger. Hindsight is 20/20 but it’s sometimes a bad thing. Looking back, one of my biggest winners in my investment career, one I made a million dollars on, was mostly luck, and that scares the shit out of me. If that company were to exist today just as it did years ago when I bought it, I would never buy it.  I now have a wife, a mortgage, responsibilities, and you better believe that creeps into my thinking. I don’t have the nerves of a 20 year old anymore because I can’t, but it doesn’t mean I have to invest like I’m scared. Scared money doesn’t make any money.

It’s important to invest with a passion and get everything you can out of your experiences, good and bad. Don’t let your experiences make you too risk averse and cynical and keep an open mind to new ideas and companies. 

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MicroCapClub is an exclusive forum for experienced microcap investors focused on microcap companies (sub $500m market cap) trading on United States, Canadian, European, and Australian markets. MicroCapClub was created to be a platform for experienced microcap investors to share and discuss stock ideas. Since 2011, our members have profiled 1000+ microcap companies. Investors can join our community by applying to become a member or subscribing to gain instant view only access. MicroCapClub’s mission is to foster the highest quality microcap investor Community, produce Educational content for investors, and promote better Leadership in the microcap arena. For more information, visit http://microcapclub.com and https://microcapclub.com/summit/

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