Wouldn't it be nice to see a share price jump, in a single day, by more than the price you paid for those shares?
(Motley Fool co-founder David Gardner calls it a 'spiffy pop'!)
It happened. Yesterday.
I want to tell you that story.
And it's one that – spoiler alert – makes me look good.
Now, despite the fact that I 'put myself out there' (as the cool kids say) via these articles, plus radio and television appearances, you need to know two things about me:
1. I'm hugely introverted; and
2. I cringe at even a hint of self-promotion or self-congratulation.
Why do I do all of this, then?
Because, despite that, I truly want to help people improve their financial position and prospects.
And this job gives me that opportunity.
(Also, because there are some scumbags out there, and if I can provide a counterpoint, then I've hopefully done something worthwhile.)
So… let's get some other stuff out of the way, first:
I'm no genius.
I make lots of mistakes.
My failings are legion.
And I've had very few truly original investing insights.
Now, let's assume the first three of those are self-evident.
The fourth is just objectively true. See, there's nothing truly new in investing. There hasn't been for decades.
There are new versions of old stories, but the basics have been the same.
(If someone is trying to sell you a new way to get rich… you'd been warned!)
So, if and when I've had success, it's usually just by sticking faithfully to what we know works, rather than reinventing the wheel.
And, luckily for me, that's been enough to deliver good gains for our members.
So… this isn't about me at all, really.
It's a story of basic investing principles, faithfully applied.
Aaaaand, with the focus neatly diverted from me, on with the story…
Way back in 2012, the investing advisory service I run, Motley Fool Share Advisor, released our monthly recommendation.
It was a travel management company, focussed on business clients called – unsurprisingly, Corporate Travel Management Ltd (ASX: CTD).
On the day of the recommendation, CTM shares closed at $2.26.
Yesterday, on the back of the announcement of a contract win, those shares jumped by $2.28 each, closing at $21.18.
And adjusting for dividends, the cost base on our scorecard for that recommendation is actually now $1.90.
So, yesterday we had a one day gain that was greater than the share price on the day of recommendation.
And, the share price is now more than 11 times our recommendation cost base.
(I also own shares. But, as is our practice, we let members go first. So I can't quite claim those same impressive stats, because I bought at a slightly higher price. But I'm not complaining — I've also done well.)
Another reminder, before we go on – I've made some bad mistakes, too! Not every recommendation does as well as CTM!
Why am I telling you all this?
Just another garden variety humblebrag? Or a not-so-humble-brag?
No. In fact, I'd rather not be writing this at all.
But I am, because theory is one thing.
Practice is another.
I can tell you all about how good I think investing is, and can be.
I can talk about a hypothetical future 'you' that has a comfortable retirement thanks to the power of compounding.
And you'll read it and understand it, absolutely.
But there's nothing like being able to back it up with, as the TV cooks say, 'Here's one I prepared earlier'.
See, the ASX has been pretty volatile of late.
Moreso if you own growth companies.
Doubly, if they were hit by COVID.
It's tempting to look only at the recent past and wonder if this investing thing is really worth it.
Or if shares will ever regain their mojo.
Now, I can't make promises. I'm not allowed to, and it'd be irresponsible, anyway.
But what I can do is show you how things have worked in the past, and tell you that I see no reason why the future should look any different.
(You think it's 'different this time'? They've been saying that every year since 1900!)
I can tell you that the $2.28 per share company is now selling for $21.28 at the time of writing.
I can tell you that, in between times, it went to $12.50 in 2015, then back to $8.90 later that year.
It hit $31 back in late 2018, then fell to $5.50 in March 2020.
It was $26 back in April 2022.
And dropped to under $15 last December (more on that in a bit).
And now it's back to $21.28.
Did I mention share prices are volatile?
Ah, you're wondering, why didn't I sell at $31 and then fill my boots at $5?
Because you have the one thing I didn't have at those times: the benefit of hindsight.
But also, I want to remind you that we've earned an 11-bagger for our members (11 times their money!) without fancy trading or the hubris of thinking we knew what came next.
We just did the stuff I mentioned earlier – the basics of good, long term investing.
And that's it.
And it's why I'm sharing this story.
Am I proud of that result? You bet.
But it's truly not about me.
I'm stoked for our members.
And I'm pleased that I can share a real world example of the power of investing.
Not trading.
Not tea-leaf reading.
No charts, no fancy algorithms. No obsessive following of share prices. No expensive 'trading systems'.
Investing.
Buying with the intention of holding for the long term.
Holding, even when it hurt.
Because we believed in the future of the business.
Oh, and the bit I mentioned above?
Last December, with the share price under $15, we recommended our members buy more.
Because sometimes, the best company to buy is the one you already own.
Members who followed that recommendation are up 45% or so.
I'm stoked for them too.
Because it can be hard to buy when shares are down. When the market is in the dumps.
But that's when we need to focus not on the market or its moods, but on the business.
Not every investment goes this well, as I said.
Some are mediocre.
Some just plain suck.
But done well, finding just a few winners like CTM (and others) can deliver a very healthy long term gain.
Me?
I'm just standing on the shoulders of giants.
Graham. Buffett. Fisher. Lynch.
They're the GOATs.
Not only for their approach to business analysis, but for their mastery of behavioural psychology.
In fact, I'd wager the latter is more important than the former.
So I'm not reinventing the wheel. I'm no uber-visionary. And I'm rarely the smartest bloke in any room.
But, if I do the basics well, I have a strong belief that it'll turn out very, very well over the long term. CTM is just one example.
And I have a strong belief that the same can be true for you, too.
Here's to compounding. To long holding periods. To riding the waves of volatility.
And, to the long term benefits of compounding.
Have a great weekend.
Fool on!
