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An intro to ‘ick’ investing - July 2024 (#30)

Hey y’all. Your dude Brent is gonna let you in on one of his favorite strategies for wealth building. I promise you, your first reaction will be one of absolute disgust! Of revulsion!… but hold on! Stay with me! There’s money to be made!

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Motivation

‘Ick investing’ means taking a special analytical interest in stocks that inspire a first reaction of ‘ick.’ I tend to become interested in stocks that by their very names or circumstances inspire unwillingness - and an ‘ick’ accompanied by a wrinkle of the nose on the part of most investors to delve any further. 

-Michael Burry

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Alrighty folks, it’s time to introduce you to ‘Ick Investing.’ I was first introduced to this subject way back in college when I read the book ‘The Big Short’ by Michael Lewis. It’s since become a famous movie, but guess what… the movie leaves out this little gem…

So ‘ick investing’ is just what the quote above says it is. However, I apply it more broadly than just stocks. Any potential investment qualifies. All that is essential is hearing the name of the investment and saying ‘ick!’ As in the idea of investing in it DISGUSTS you. Here’s the thing, if it disgusts you… it probably disgusts other people… and as a result there’s a higher likelihood there is money to be made!

Let me give you some examples:

• Lumber Liquidators! Back in 2015 this company was selling flooring that had known carcinogens, and worse yet… it looked like they knew they were! All to save a few cents! The media coverage was HORRENDOUS!!! They were fined and appropriately vilified. ICK!!! There stock went down to $15… then was back above $30 after a year!

• Porta Potties! Spoke to a friend the other day who invests in businesses. He said they were evaluating a Porta Potty biz that was doing KILLER numbers… if you can handle dealing with poop receptacles… ICK!!! He said Porta Potties pay themselves off in as little as SIX MONTHS in some markets… After that it’s all gravy!

• Trailer Parks in dying towns! I’ve got a buddy who specializes in buying run down Trailer Parks in the midwest. He buys in areas few people would care to own anything, let alone a trailer park! You want to deal with Muumuu’s and meth!? ICK!!! However it’s tough to ignore the killer cash flow he makes off these parks…

Let me point out that in ALL of these examples you MUST get deeply analytical to get comfortable buying something like this. The idea is that when you hear about a potential investment and you wrinkle your nose in disgust THAT is your signal to go DEEP on research and see if, and when, there might be an opportunity. Here’s one of my favorite examples that ended up being a home run:

Back in 2012 I bought Banco Santander stock, it’s a large bank based in Spain. In fact, it’s like THE Spanish bank. At the time Spain was looking like it might default on its debt and the whole country would be plunged into deep recession. As a result the bank’s stock was trading for CHEAP. I looked deeper and saw that the bank did the vast majority of its business outside Spain and much of it was even outside EUROPE. I bought heavy… and it more than doubled within a year. It doesn’t always happen that quick OR that well, but it absolutely can.

Ok, here’s where it gets interesting. What’s a potential investment that makes you go ‘ick’ right now? Here’s a couple stock ideas for you to DO YOUR OWN RESEARCH on.

• Boeing, this company has been making faulty planes where the friggen doors fall off and MISLEADING the Federal Aviation Administration. Ick!!! Why might this be an opportunity? Because the US government is deep in bed with these losers and I’d be shocked if Boeing isn’t still landing government contracts and making crappy planes 5 years from now…

• Crowdstrike, this is the dumpster fire of a cybersecurity company that caused all those outages a couple weeks ago. I’d guess they are going to get sued big time… Ick!!! IF they survive there might be an opportunity because… well, as we’ve seen they have a TON of companies using their product and they’re obviously critical to global IT infrastructure…

With any potential stock play the trickiest part is TIMING. When do you buy the dang thing??? With this style of investing it becomes CRITICAL and I won’t lie, getting the timing right is dang near impossible, so dont think you will. However you don’t have to get it perfect, just close enough. What I like to do is if there’s a stock I want to keep an eye on I’ll buy just a little bit. That helps me keep an eye on it. Then as it goes down (AND THE FUNDAMENTALS REMAIN GOOD) I keep buying more and more. I like to buy EXPONENTIALLY. That means at first I might buy one share to keep an eye on it. Then I might buy ten shares if I think things are getting to the bottom. Then lets say it drops another 5%, at this point I’m thinking FIRE SALE so I’d buy another 20 SHARES. Then if it drops even more I’d buy 40 shares!!! Obviously, how you structure this depends on how much money you can spend and afford to lose. I encourage you to always begin with the end in mind and have a plan right from the get go.

So there’s one other thing to address for ‘Ick Investing.’ And that is the morality of investing in companies that may have done negligent or immoral things. Here’s the thing you have to remember… it’s not just the idiots or crooks running it that own the stock… chances are its millions of retirees, innocent employees, and normal people who unknowingly got caught in a bad situation. Your buying provides them a way out. I’m not saying buying makes you a hero or anything, just that it does NOT necessarily make you a villain.

So there you have it. Now you know about ‘Ick Investing.’ My hope is whenever you hearing scathing news headlines about a company or an idea that makes you wrinkle your nose… your second thought is to dig deep and see if you can uncover some gold in that ick!!! So go deep and get icky!!!

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