Top 50 Microcap Investor List: Trey Henninger
The next feature of our Top 50 Microcap Managers list is Trey Henninger, a private investor, engineer and business owner. As an investor, Trey primarily focuses on Microcap securities with “durable owner’s earnings and shareholder friendly management with skin in the game.”
Download our feature on Trey Henninger
Acceptance
In 1969, psychiatrist Elisabeth Kübler-Ross first published her theory on the five stages of grief. Those stages are:
Denial
Anger
Bargaining
Depression
Acceptance
Her work has proved durable and is still widely used today. It’s also applicable to the psychology of investing when things go wrong.
When company results disappoint, or an investment goes down, one’s first reaction is often denial—the market and other investors just don’t understand what’s really going on. Then if things continue south, anger often sets in. This can be directed at management, yourself, or the friend (or friend-of-a-friend) that told you to invest. Then comes the bargaining: “Once I get back to even, I’m out.” Or, “Please, stock market gods, if you just get me back to even, I promise to never invest in leveraged, unprofitable, competitively-disadvantaged businesses again.” Investment depression often takes the form of an inability to focus on much else in life because the unrealized losses consume most of one’s mental attic. And then comes the acceptance that a mistake has been made and the money isn’t coming back.
But it doesn’t have to be this way. Businesses and investments don’t usually go to zero, or near zero, in an instant. If you can keep your ego out of the way and be open to the fact that maybe you are wrong, you can, unlike other areas of life, skip straight to acceptance. You can get straight to accepting the facts at hand. You can get straight to trying to see the situation as it really is. If something truly isn’t as you thought it was, you can take your losses earlier, and move on. You don’t have to make the money back the same way you lost it.
The Nasdaq index closed 2021 just a little over 3% from its all-time high, and then dropped about 4.5% this past week. But the average stock in the index is down about 40% from its highs, with many of the “stay at home” stocks that were popular over the last couple of years down somewhere in the 50-80% range. Investors in those stocks—many of whom are new to investing over the last two years—are probably somewhere along the five stages of investing grief. Maybe those names bounce back and reclaim the lofty and loftier and loftier valuations of the recent past. Or, maybe, we’re about to see a continuing and major rotation from the “new economy” stocks back to the “old economy” stocks. Time will tell and we make no macro predictions. But we accept that things change. We accept that trees don’t grow to the sky. And we accept that a humble examination one’s portfolio holdings is always good practice.
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