Top 50 Microcap Investor List: Rod Maclver
The next feature of our Top 50 Microcap Managers list is Rod MacIver, an investor, writer and MicroCapClub contributor “living in the Adirondacks, Florida and Vermont. He focuses on companies with a sustainable competitive advantage or “moat” as reflected in extraordinary profitability, little or no debt and minimal capital expenditure requirement.
Read our feature on Rod Maclever here
Know Thyself
“To know thyself is the beginning of wisdom.” —Socrates
“There ain't only three things to gambling. Knowing the 60/40 end of a proposition, money management, and knowing yourself.” —Puggy Pearson
Investing is as much psychological as it is analytical. Prices go up and down. Wealth goes up and down. Emotions go up and down. How someone handles the emotional side of investing in the stock market can make a big—maybe the biggest—difference in the rate at which one compounds capital over the long run.
Part of handling the ups and downs well is taking the advice of Socrates—know thyself. Do your emotions swing along with the market? Do you get stressed and depressed when things are down? Or do you treat volatility as opportunity, and stay cool and calm when the crowd seems to be losing their heads? Your answers to these questions can help determine how conservative and diversified you should be, and the odds of your success over time.
Another part of handling the volatility of the market comes from aligning your personality—formed by some combination of nature and nurture—to where you choose to fish for investment opportunities. Some people worry, about some things and all things, sometimes and all the time. Some people are natural born optimists. Some people are positive realists. Some people are cheerful pessimists. And some people are a little bit of them all. Whatever personality you have, it can affect your ability to succeed in the types of opportunities you pursue. There is wonderful example of this in William Green’s excellent book Richer, Wiser, Happier in the chapter on Howard Marks:
It also helps if, like Marks and Price, you stumble into an opportunity that happens to suit your talents and temperament. “Debt fits my personality,” says Marks, “because you have a promise of repayment” when the bond matures, plus a promise of annual interest payments. If the debt is repaid, you know in advance what your return will be because it’s spelled out contractually.
The key is to avoid getting saddled with bad loans, so the first question to ask is whether the borrower is creditworthy. The second question is whether the borrower’s assets are sufficiently valuable, since the creditor will have a senior claim against those assets if the debt isn’t repaid. “I think these questions are answerable,” says Marks. In an uncertain world where so many questions are unanswerable, bonds offer a comforting measure of predictability and control. Bonds are also less risky than stocks, which is reassuring for a natural-born “worrier.”
What would have happened if his boss had given him a less appropriate assignment, such as running a venture capital fund? “That would have been terrible for me,” says Marks. “In venture capital, you’ve got to be a dreamer and a futurist.”
There are plenty of headlines these days with the potential to cause more volatility—inflation, war, interest rates, valuations, elections, shortages, etc. But there are always headlines for one to justify just about any action one’s mind wants to take. So before you read those headlines too closely, we suggest you make sure your mind is focused on playing the game it’s best suited to play well.
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