2022 market been extremely painful for many investors. To really understand it you have to understand what happened prior to 2022. There is a great book called Bulls by Maggie Mahar which explains these long bull markets that last 13 years. We just had a major bull market that lasted 13 years. So 2022 is popping of that bubble, something that is going to remain painful and will take time to clear out.
So how do I deal with this market? First of all you have the realize that checking daily stock prices is futile for your wealth and your health. The stress from intra-day fluctuations can have major impact on your mental and physical health. So I don’t look at the daily stock prices of my positions. Infact, I haven’t looked at the value of my holdings for weeks. Why? I currently don’t have lot of cash to buy anything. I don’t see anything being really appealing at these prices. So checking prices on a daily basis has no benefit to me.
When I look at my portfolio, I see all my positions being substantially down in 2022. Although when I look at the fundamentals of the companies, I think they are on track to deliver. Except for one (Oroco Resources), I see the companies operating really well and on track to deliver the value that I’ve been tracking. So the daily stock price is noise for me.
Eastside Distilling is my most recent buy. It sports a $10M market cap and has a stock price that is down 60% in 2022. The company has been starved for cash. In the last 9 months the company has done 3 capital raises or debt financings, all of which had dilution associated with them. The stock price has come down with each dilution. So the 60% drop in stock price is 2022 seems fair by the market, a company running low on cash and doing dilution to get cash. Clearly this company is struggling and likely will struggle more in a market that we are seeing.
Although in June 2022 the company acquires assets of another company for cash. Then later in June 2022 the company pays off an onerous debt. So we had a company did 3 capital raises to get cash to survive and then in the last 45 days we see 2 transactions where the company is spending cash. Seems like either management is taking on huge risk for a high reward or something fundamentally has changed with the company. (It is unlikely the mgmt is swing for home run because the CEO did a large open market transaction in May ’22).
My belief is a fundamental change has happened with Eastside. The company that was once struggling for working capital is now a company that is confident on its cash generation and slowly moving to the offense. Only time will tell if this change is something that will completely change the company or it is a short lived excitement. What is clear is the market seems to not care of the fundamental change that has happened with the operations and finances of the company.
When there is pain the market, I focus on the fundamental of my companies and make sure they are getting stronger. So far I see almost all my core companies executing. Eastside Distilling getting financially stronger by getting the digital printer running; Emerita Resources drilling Romanera and proving the historical drilling undervalued the asset; Voxtur Analytics getting its AOL system in more pilot testing and getting ready for major launches; Glass House Group putting its unicorn asset into production.