Chris Berry's Investment Strategies

By Chris Berry
Stepping into the investing sector can be overwhelming, and newcomers will no doubt have a variety of questions before making any long-term decisions.
For starters, researching the company an investor is interested in is key, but should also take time before making a decision.
Following the markets and staying up to date on news is also important–as they are volatile and can fluctuate on a daily basis–thus, investors should never ignore what the market is saying.
Key strategies include:

• Remember: Junior mining isn’t investing– it’s speculation. As such, traditional investment analysis does not apply/work.
• Watch out for private placements unless it’s an IPO and you can sell to the “greater fool”.
• A resource play must have secondary listing. NO strictly bulletin board plays.
• Management must own shares (not gifted).
• Read every financial docment (10Q, 10K, annual report) in reverse chronological order.
• Read sell side research only to gauge consensus.
• Parabolic stories always end in tears. Mean reversion is as sure as death and taxes.
• If it’s too good to be true, it probably is.
• If the company won’t expand on a claim made in a press release–run away FAST.
• Vague press releases are vague for a reason.
• When investing, ask yourself if you’d rather be late and right, or early and eventually wrong.
• What is the company’s “Plan B”?
• Why would a company take on debt if the company isn’t generating revenue to service the interest payments?
• What does management take home in cash relative to the market cap?
• How “disruptive” is the company’s asset/technology/competitive advantage?
• What is the company’s dilution strategy on philosophy?
• What are the factors that will drive revenue/cash flow/earnings growth?
• When a stock falls big in an up market, management must respond. If they don’t–sell immediately.
• A great deal of insight can be gleaned from watching volume and options activity of a company.
• Don’t chase the market up OR down.
• You’ll never go broke taking profits.
• If you argue with a fool it is very likely he/she is doing the same.
• Don’t average down, average up–you have less $$ invested in stocks that don’t work, and more invested in those that do.
• You have to remain agnostic and CAN’T FALL IN LOVE. Especially with commodities.
• Think about the percentage weightings of each stock in your portfolio–in absolute terms and relative to the market caps.
• Do you want to get on base or hit home runs?
• Don’t ignore what the market is telling you.
• Capture macro uncertainty with the discount rate. The sell side almost always puts this too low.
• NEVER add to losses.
• How much is the company management paid and how? (Cash? Shares? Options?)
• Phony and short lived booms destroy more value than they create.
• What is a SG&A as a percentage of market cap?
• Limit the shelf life of your trades.
• Opportunities must grow at least double GDP.
• Follow the trendline, not the headline.
• What is most important is what ISN’T in the press release vs. what IS (eg: average selling price to an unnamed off take partner but no mention of costs?).
• Think about the sustainability of a given business model.
• There is a different pitch to institutional and retail investors.
• Economics (of a deposit, of a manufacturing line, etc) MATTERS! It’s great if a company can produce something at a bench scale, but what about everything else? Can they produce something at a loss and then still profit?
• How you think matters more than what you know.
• Skepticism and independence are worth more than you can calculate.
• As Charlie Munger says, “The way to minimize risk is to think.”
• He also says, “Invert, always invert.” Re: your investment thesis.
• You don’t have to make money back the same way you lost it.

Analyst thought process:

• What is the goal of the business?
• How does the business make money?
• How well is the business doing?
• How is the business positioned relative to its competitors?

You have to know your own strengths, weaknesses, and biases.
Be sure to do a post mortem on past wins and losses. How much luck was involved versus skill?
For an ongoing list, click here to stay up-to-date on investment strategies and how to be successful in the market.