Potential Activist Shareholder
Some of the best returns that I have ever generated have been solely from following other smart investors into their favorite stocks. I’m a big fan of following smart money. Why do the extra legwork when someone you respect in the investing industry is already pounding the table on why everyone should buy. I understand that you need to do your own due diligence to get the conviction to hold those stock ideas for the long-term. But when it comes to initial idea generation, my favorite way to find stock ideas is by following other smart investors.
To make it clear, I don’t follow big money like Warren Buffett, Seth Klarman and Bill Ackman. These three men are incredible investors. But the assets they buy are way out of my circle of competence. Buffett, Klarman and Ackman are deploying multibillions into assets. I am deploying my own personal portfolio that is pennies to these men. I’m not following legendary billionaire investors into stocks. I am following small fish in the sea of investing who have made a name for themselves in their specific niche. These small fish are other intelligent small and microcap value investors.
My best ideas come from picking up the phone and calling my friends who have a similar investing strategy to me. I’ve traveled all over the United States and have built up a decent network of likeminded investors who have become friends. When they pitch me their best idea, I listen. I also scroll through Seeking Alpha comments of my favorite investors to see what they are talking about. We talk in the Alpha Letter Telegram channel about our best stock ideas. Comments on public boards from investors I respect have generated untold amounts of alpha for me. Finally, my new favorite way to find ideas is on Twitter.
A lot of you probably know me from the handful of Twitter accounts I have ran in the past. Over the past two years I have accumulated over one million followers and lost them all after getting “permanently” banned from the platform. A few years ago I thought Twitter was just way to make jokes about finance and whatever else. But after spending countless hours on the platform building up multiple accounts, I have come to realize there is a small sub-sector on the platform talking about investing.
I’ve started to follow a handful of Twitter accounts on a religious basis. One of my favorites is The Coal Trader who has generated in excess of 1,500% returns this past year by trading coal and other energy equities.
Another great account is Askeladden Capital, a small and microcap hedge fund market beating returns since inception.
Then there are the handful of small no-name accounts that provide hints of value every so often.
I bring up Twitter and the value you can get by using the social media site in a proper way (not creating trolling parody accounts LOL) because of a Tweet that I saw this morning.
The tweet was from a small account that tweets mostly about the oil and gas industry. They typically don’t tweet anything actionable. But today they tweeted out that a well known oil and gas hedge fund manager was looking to run a proxy battle on a formerly bankrupt oil and gas company with a market cap under $500 million.
The tweet didn’t get many likes or retweets. There was a few replies but nothing much. But what is most interesting is I know this oil and gas hedge fund manger. We have spoken occasionally throughout the years. He is a great value investor, boosting returns of over 390% in 2021. He has ran a proxy contest on another small oil and gas company, generating his investors strong returns. And I think I might have a hint on what company he could be running a contest on. Let’s attempt to front-run him.
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