There is definitely something in that post for all SM investors @jcmleng. I certainly need to do more internal reviews on my investing style and mindset. The only thing in my favour is my ability (or lack of effort/laziness) to be slow to buy and slower to sell for all of my company positions. The toothpaste tube analogy has a nice ring to it, but in the case of $AVH, you must be starting to get some air gaps in the tube after 3 years of volatility that now sees the SP pretty much the same as 3 years ago.

I haven't tried to follow $AVH too closely, so have no opinion on its value, but kudos to you and others that believe in the numbers and are willing to stick it out for a brighter future.

Disc not held IRL or SM

@lowway , hahaha! AVH is still relatively "new" for me, held for only 1.5 years.

My hold duration "average" for once-in-the-absolute-pits-of-the-doghouse holdings CAT (since 2017), EML (since 2019), EOS (since 2020) is about 6-7 years, so still some years to go with AVH before my patience runs out ...! So, I am still in "improved performance" territory with AVH on the "Enter early - but not too early" learning ... !

@jcmleng a lot of good stuff here. this November marks 40 years of investing in equities for me, i was thinking of writing a "lessons learnt" piece; there will be much commonality

@jcmleng and @Solvetheriddle I've been doing a lot of thinking recently about what investment is, my investment style and what do I really want from my investments. I think for me the great benefit of strawman is threads like this one that go beyond single stock, Q2 or H1 Fy25 analysis and try to understand what makes a good investment and more importantly, what makes a good investment for me, for what I want from my investments. I think the person who truly knows, and executes, that is the biggest winner in this game.

And thank you to both, and many, many others, for sharing your wisdom, insights, failures and learnings. We're all richer for it.

Great post @jcmleng , the 'Don’t compare yourself to others. Let other investors run their race. Too much time is wasted watching stocks you would never buy at any price and then beating yourself up over not owning them when they advance' really resonates with me. I feel that way regularly about Bitcoin.

By the same token (no pun intended), 'evolve or go extinct' resonates re Bitcoin as well. The struggle continues.

Yeah great post @jcmleng, and I can definitely empathise with holding too tight onto various tubes of toothpaste..

Also, @Solvetheriddle I'd be really keen to read your reflections on 4 decades of investing. If you're up for it, we could even walk through some of those observations for a Zoom meeting.

Seconding @Bushmanpat and @Strawman - I find these sorts of discussions among the most valuable and thanks to everyone who puts their ideas out there. @Solvetheriddle - lots here would be very interested to hear your insights accumulated over 40 years.

Thirding @Clio, @Strawman, is love to hear to watch a 40year review of your investing growth!!

As @jcmleng posted, I'm sure it will be littered with many toothpaste tubes with various quantities of toothpaste.

Thank you for sharing your thoughtful reflection @jcmleng. Cassel’s essays were new to me, but I’ve since downloaded them (and will be digging into old posts!). I can see how these lessons help shape your investing mindset, and how revisiting them can deepen growth and experience. The way you’ve internalised these principles shows just how timeless and practical the advice is…even for beginners like me. 

I find small and microcap investing fascinating, and I think that much of it comes from the unique dynamics you (and the essays) describe. The challenge of dealing with imperfect information, the constant need to stay on your toes for those subtle signs, the I/T ratio, the balance between intellect and temperament (which might be the one that surprised me most), etc. Just as we look at the PE ratio, I think the intellect/temperament ratio (or better still the T/I ratio) is as important for evaluating ourselves. I’m finding that having the right mindset matters as much, if not more, than raw analytical ability. I love that evolving as an investor seems to be about staying committed to learning and realising that investing is a marathon, not a sprint.

As someone relatively new to all of this, I’m still learning, and your post was great to read. It’d be cool to hear more about your and @Solvetheriddle’s take on the “art of catching falling knives”, so I hope you take @Strawman’s offer…no pressure, though!

Thanks again for sharing.

Cheers!

@Strawman sounds good, I will dm you after results season. I’ll try and think what is most relevant for the group, bounce some ideas of you. 40 years I can’t believe it. ????

Great thread, great discussion, I have some thoughts but often struggle to be both thorough and concise, so to keep me on track I'll just relist Cassel's points again that were listed at the top of this thread by @jcmleng and I'll add some commentary below them:

The Casel lessons:

Microcap investing is by an large a game of acting on imperfect information. Often times an opportunity is an opportunity because the conditions aren’t perfect yet.

Absolutely - even the management and Board at the business are acting on incomplete and therefore imperfect information, and we know way less than they do, so there are always going to be a wide range of outcomes and we need to be choosy about what we value and stay mostly within our own personal sphere of competence (wheelhouse).

Being choosy about what we value means, in my case at least, realising the high importance of management quality and industry position. Industry position can mean the company is the dominant player in their industry or that they are a disruptor gaining market share. Moats are important and whether the moats are growing or shrinking is even more important. So, management, industry position and moats (competitive advantages) are 3 of the most important things I'm looking for, and preferably the company operates within an industry I understand, and I also understand how the business operates, i.e. how they make money, and why they should be worth substantially more in the years ahead.

And with all that said, we are still operating on imperfect information, so we need to know what we don't know, and be prepared to be proven wrong in terms of what we think we do know, and act accordingly. When the facts change (as we understand them) it is entirely appropriate to change our minds - to align with new facts.

And yes, I do understand that this rule is also about the fact that you are often going to be seen by others as being too early into a company because the company isn't moving in the direction you want it to move in - yet. But I feel it's important to understand WHY you believe their future is going to be a lot better.

Don’t compare yourself to others. Let other investors run their race. Too much time is wasted watching stocks you would never buy at any price and then beating yourself up over not owning them when they advance.

Yep. PME. 'Nuff said. Hold it here on SM. Don't hold it in real life. Always looked too expensive. Still does. Still keeps rising. Not within my wheelhouse. You can't pat all the fluffy dogs.

These situations usually take more time to turn than most shareholders can stomach. The opportunity is to understand the turnaround process and to accumulate when you see the signs of it turning.

This one is about turnaround plays. Agreed. The first thing I look for in a turnaround for that turnaround to have any chance of success, is new management. The second is a new strategy. Next is the company's industry position and the outlook for that industry. They almost always take a lot longer than you expect, if they turn around at all, and there's usually better opportunities to make faster profits that you forego by remaining stubbornly in the turnaround waiting for it to turn, and the longer it takes, the greater the share price drawdown is likely to be, and with that perhaps a few CRs along with it. They are almost always not worth it. Except when the company was always a good company and they were smashed by something that was out of their control and was also temporary not structural, and they have the management and industry positioning to get back to what they were and power on from there. But generally speaking, turnarounds are not usually worth the time and the opportunity cost of tying up your capital.

You are looking for external and internal tells. An external tell is when something outside of the company has changed. An internal tell is when something inside the company has changed which could impact your thesis.

Yep, looking for these all the time, and then immediately thinking about the nature of the change - structural or temporary? What does it mean, and over what timeframe?

Investing is 5% intellect and 95% temperament. You often have to turn your back to the crowd and stand on your own.

100% agree with this. You have to have conviction. You know the saying... You can borrow an idea...

Be patient. The stocks that have been most rewarding to me have made their greatest gains in the third or fourth year I owned them. A few took ten years.

I'm still working on accepting this one. I'm not too bad at companies where I've seen where they can go back to and it's just a temporary setback that's causing the delay, but I'm often not patient enough with early stage companies who haven't made it yet and are taking too long to get there - in my opinion. This behaviour of mine is likely caused by being too far the other way in my earlier years when I lost money by holding onto too many losers for far too long, always giving them extra rope when I needed to instead cut them loose.

Gets back to conviction once again, and examining the strength of your own conviction in that company and whether the basis for that conviction is solid enough and still holds up. I try to set realistic timeframes and I'm prepared to stretch them, but not when I think it's becoming thesis creep.

Enter early — but not too early.

Easy to say; not so easy to apply this one. It's like saying if you buy a stock and it goes up, hold it, if it doesn't go up, don't buy it. Too late, right? You've already bought it. You sometimes don't know if it's too early until later. It's a hard one.

Stocks rarely perform in the time frames we predict, and it’s why the market only works for investors that have patience.

Sure, but setting realistic timeframes for an investment outcome is still sensible, as is adjusting those timeframes to suit new facts as they arise, but also knowing when that has become thesis creeep and you just need to move out and move on. And that will be a subjective assessment that will be different for each of us.

If you aren’t excited about the future, you are in the wrong investments. You need to own investments whose mission, management, and products/services excite and energize you. Why? It’s the only way you will be able to hold them.

Both agree and disagree. That applies to the early stage companies whose share prices might be heading the wrong way initially, but I'm also happy to hold less exciting companies (even boring companies) if they have everything I'm looking for in an investment and they're performing as I expect them to.

Nothing tests your conviction like falling stock prices.

True, but you get used to it. I realised during the GFC and then in early 2020 during the mini-Covid-crash that I actually have a good temperament for investing in terms of rationalising falling share prices. But then those are the times when everything is falling, and I actually find those easiest of all to deal with. It's when a company I own goes into a steep downtrend when its peers continue to do fine that is a bit harder - because then I'm playing the "what do they know that I've missed?!" game.

That said, if I think I know why the market has gone negative on the company, and reckon I know better than the market does with regard to that particular little nugget of information, then I'm fine with it - usually. It's the not knowing why a company's share price is falling that bothers me sometimes. Not over a day or even a week, but a multi-week downturn when everything around it is doing fine gets me wondering what I've missed. I'm usually way happier if I can rationalise why the company's share price is falling, especially when I think the premise is flawed. As long as I've got a label like "market overreaction" or "jumping at shadows" to apply, I'm usually fine with it. But I never used to be - acceptance of random market movements and differences of opinion and sentiment comes with time in the game I reckon.

The art of catching falling knives is determining whether the fall is business or non-business related. If it is non-business related you buy. If it is business related you don’t buy or maybe even sell.

That's true up to a point - but I would also add that it ALSO depends on whether the business-related fall is temporary or structural, and if structural you sell, and if temporary you've got more work to do, and it might actually be a buy. Timeframes. Outlook. Management Quality. Plenty to consider before reaching that conclusion.

Trying to get a multi-bagger by focusing on the next quarter is like trying to find an elephant with a magnifying glass. Zoom out. Track quarterly results against a 3-year thesis.

No argument with that. You need perspective.

Hold your positions like a tube of toothpaste. Don’t hold them too tight. No company is perfect. Give them enough room to disappoint you a little

So don't hold the leash too tight - give them some rope. Yeah, a little? OK, but a LOT? Yeah, nah! Depends on the type of disappointment and whether they are repeat offenders - and whether it's like a rookie error or a fundamentally flawed (poor) capital allocation decision that suggests it might become a pattern. A little rope is OK, but not too much.

And also - it pays to set realistic expectations and allow wiggle-room. I'm not one to say I want to see X dollars of NPAT by this date or I sell. It's more that I want to see positive progress every report, or at least 75% of the time, and I have ballpark targets I'd like them to reach within realistic timeframes. Again, adjusted when necessary as the facts change. Global Pandemic? Supply Chain collapsed? Global Financial Crisis? The Taliban just took over one of your main target markets? You've had to close your Russian office because they invaded a neighbour and got themselves into a war? Your mine and everything for 100 km around it was flooded and the only way in and out was by helicopter? Your warehouse burned down? Your head office got blown away by a cyclone? Your CFO who is also your company secretary was in hospital after a heart attack and you got a please explain from the ASX for late lodgement of a notice? Your MD was just exposed in the media for alledged tax evasion and self-enrichment at the expense of the company? OK, that last one would give me reason to reassess my investment thesis, but the others? Stuff happens. Adjust. Move on.

Evolve or go extinct

Yes, doesn't pay to be too dogmatic about things when the world is changing around you. Change your mind as the facts change.

I would add the following:

1. Don't anchor. Don't anchor on purchase price, or breakeven, or what the company was trading at last year. The market doesn't care what you paid for your shares, and the business today might well be a very different proposition with very different future prospects to what it was then. You never have to make your losses back in the same company. You can switch over to something better at any time and make your money back with a superior investment.
2. Never underestimate the importance of quality management in a microcap or a mining company and the influence that good or bad capital allocation decisions by said management can have on your total return from an investment. Even a great company with superb future prospects can be blown up by poor management making bad decisions.
3. Be very aware of what you don't know. For instance, I know next to nothing about biotechnology, pharma, crypto companies, blockchain and fintechs, so I generally avoid them. This one is about mostly staying within your own circle of competence. There's nothing wrong with striving to extend your own circle of competence by learning more every day, but know what you don't know. Know your own personal limitations. It's hard to have high conviction in a company you don't fully understand. And you need to have high conviction to ride out the rough times.
4. Free stock tips, especially those you get down the pub, at a BBQ, or from an Uber/Taxi driver are usually worth exactly what you pay for them. Always DYOR.
5. Diversification can easily become diworsification. If you were only allowed to invest in one single company, how much research would you do on that company? You'd want to know everything about it. How it makes its money, its competitors, its market position, its moats (competitive advantages), every known risk the business might face, supply and demand for its products and/or services well into the future, as much as you can know that stuff, everything about the company's management and what they'd done before, their track records, their skin in the game, as much as possible about the industry the company operates in, and structural risks or external shocks that industry might face in the future and what this company is planning to do in those events, their balance sheet strength, their debt details, who do they owe money to, under what conditions, when does it have to be repaid, what happens if they fail to repay it within that timeframe, who actually owns the company's assets if they default on their debt, what agreements do they have with partners, suppliers, customers, etc., that are or might become material to the business? I could go on for pages, and much of that stuff might not be able to be researched accurately anyway, so, again, we are operating on imperfect and incomplete information, but my point is that if ALL of your investable capital was invested in a single company, you'd want to be a bloody expert on that company, right? It's not as bad, but equally, if you only hold 5 companies, you'd want to know a hell of a lot about them right? What about 10? To be honest, I'm happy holding between 10 and 14 companies, 15 at a pinch, at any one time, because beyond that I feel I'm going to occasionally miss things that could be material to that company and its future outlook. If you invested $10,000 in each of 40 different companies and one doubled, it's still just a 2.5% portfolio value increase; your $400,000 has become worth $410,000. If you held 20 instead of 40, it's a 5% increase to the portfolio value. With just 10 companies, it's a 10% increase to the portfolio value, and I would argue that you've perhaps got a better chance of that happening with 10 companies than you have with 40 because you're going to be picking the 10 best ideas you can find to invest in - no fillers. So $40,000 invested in just 10 companies is also $400,000, but if one doubles your portfolio value has risen 10% to $440,000. So 40 companies could be diworsification, not diversification. There's something to be said for a high conviction concentrated portfolio of 5 or 10 companies. You're likely to know much more about the companies you're invested in, so you'll make better choices, and your individual company returns will have a much bigger impact on your overall wealth.

That's all I've got for now. I'll probably think of more later.

Good discussion. Agree with others that there's plenty to be gained from these sort of discussions. Even if you don't agree with everything. Still heaps to be learned and/or reinforced.

Here's an example of the "Turnarounds" issue, which is that they either never turn around, or they take far longer than you expect and you end up losing capital during the waiting, due to share price depreciation, capital raisings, share consolidations, restructurings, and opportunity costs (the money you lose by not having the money invested in far better opportunities instead of in the potential "turnaround" story):

That's their 10 year chart using monthly data points. Note that graph above and the following graphs have been adjusted to allow for the 1-for-40 share consolidation that RFG did in December (2024).

Below is their three year chart using weekly data points:

And below is their one year chart using daily data points:

And here's their headline numbers reported today for FY25:

And here's a snippet from their results announcement:

They STILL have debt issues and need to refinance (again) before April. They are still recycling brands and closing stores. They still have a poor business model that is hampered by a number of legacy issues. And their lenders have already taken several haircuts. I just don't understand why this thing hasn't been forced into Administration already.

They brought in a turnaround specialist, Peter George, as Executive Chairman in October 2018 (he was appointed in October but actually began in the role in November 2018) and in August 2022 they announced they had agreed to extend his employment contract despite his failure to get the company turned around in the almost 4 years he'd been there; That announcement said: "The Board considers the continuity of Mr George in the role of Executive Chairman to be in the best interests of the Company and its shareholders having  regard to Mr George’s oversight of the turnaround plan implemented by RFG, which whilst advanced, has been delayed by a number of factors which have and continue to influence the performance of the Group, including the impact of the COVID-19 pandemic and ongoing litigation with the ACCC."

Source: https://www.listcorp.com/asx/rfg/retail-food-group-limited/news/extension-of-executive-chairmans-contract-2754637.html

On 31st May last year (2024), almost 6.5 years into the "turnaround", RFG announced that Executive Chairman, Peter George, would transition to the role of Non-Executive Chairman of the Board, effective 1st July 2024.

The announcement said:

"Having assumed the Executive Chairman role in November 2018, Mr George noted the time was right to transition into a non-executive role.

“Since his appointment in July 2023, RFG CEO Matt Marshall has demonstrated a capability and drive for growth and sustainable value creation for the Company’s stakeholders. Supported by a strong and experienced management team, including Rob Shore (CFO) and Mark Connors (Director of Corporate Services/Company Secretary), the Company is in capable hands. It has always been my contemplation, shared with the Board and market, to transition to a non-executive role, and now is an appropriate time to do so”, he said.

Mr George will be entitled to payment of accrued statutory entitlements on 1 July 2024."

--- end of excerpt ---

Source: https://www.listcorp.com/asx/rfg/retail-food-group-limited/news/transition-of-chairman-to-non-executive-role-3038575.html

Ah well, job done then!

All turned around are we?

Judging from the share price graphs at the top of this post and today's report from RFG, I would say that the answer to that question is clearly No.

Next to see how the "turnaround" over at Nuix (NXL) is going.

Addition: 25/8/25: Yeah, nah!

Disclosure: Nope!

So many good lessons there @Bear77

One that really stands out is how much those intangibles like brand actually matter. not just as abstract assets on a balance sheet, but because they shape things like pricing power, customer stickiness, and even who wants to partner with you as a franchisee. When those erode it’s brutal.

And honestly, RFG feels like a case study in what happens when that erosion sets in. A lot of their brands just don’t carry the same weight they used to. You can see it in the constant impairments, the store closures, and the scramble to refresh concepts while leaning heavily on new plays like "Beefy’s". It's just a hyper-competitive space where you need to be super tight operationally, but also somehow bottle that "secret sauce" you need for fast food. I certainly dont think its something you easily turnaround.

shareholders can only blame themselves at this stage, but do do feel a little sorry form some of the franchisees that may have been sold false hope.

Thanks for posting a list of Ian's Investing principles @jcmleng. I'm glad I searched the forum for anything Ian Cassel! I look forward to reading through all of the other Cassel forums and following any links/references to articles he's written. The 2nd point resonates with me, "Don’t compare yourself to others. Let other investors run their race. Too much time is wasted watching stocks you would never buy at any price and then beating yourself up over not owning them when they advance". I kick myself for not buying into $CAT at 80c back 2023. Even though I'm a sports fan, semi understood the business and the products, but just didn't have the conviction to pull the trigger. Now I feel like I've missed the boat.

I've gone down the Ian Cassel podcast/YouTube clips rabbit hole the past couple of months and his micro cap investing mindset has really resonated with me. Mainly the fact that it's focusing on the shallow end of the sharemarket pond, and while it can be murcky and too shallow/not fun to play in for many "Sophisticated" investors, it's where you can really find a business that's easy to understand and growing revenues and bottom line from a low base. Some of these businesses also have pretty easy to understand business models and annual reports that aren't 100+ pages long!

What I've taken from many of the interviews I've listened too of Ian, he highlights that Buffets highest returns came in the early years when he could fish in this part of the pond, and you don't have to pick some hyper growth stock/unicorn/market darling to invest in a multi-bagger. It can simply be a $30m company doing $30m in Rev and $2m in earnings, that in 3 years grows to $40m in Rev and $6m in earnings. Then if you get a combination of multiple expansion to say 20 as well as the EPS growth (while hopefully not being diluted), you will have 4x your investment! Simple enough, hard to find....Obviously!

The MicroCapClub he created also has significant similarities to this amazing Group of investors at Strawman. While there are a range of stocks (Large, Med & Small Cap) and other assets discussed here, this is by far the best and most encouraging platform to share and challenge ideas, all the while helping each other to find those multi-baggers lurking in the shallows!

Disc. I don't have decades of investing experience like many here. But i'm always trying to adapt and find my true investing principles based on the knowledge of many in this community, on top of wider reading and better understanding my biases/psychological miss-judgements.