We’ve all seen or heard the Ted Williams hitting grid analogy used to describe successful investing. Warren Buffett and others use it often. Be patient. Know the strike zone. There are no-called strikes in investing so be patient. But the baseball analogy isn’t entirely accurate. You aren’t standing alone at the plate. There are hundreds if not thousands of other batters looking to swing at the same pitch.
When investing in illiquid microcaps your timing and preparation is even more important. Illiquidity only allows a few people to swing hard (take a big enough position) before the stock ascends over the outfielders and into the bleachers. As the late Harry Kalas would say, “this ball is outta here!” – Replace “ball” with “opportunity”.
You get one or two fat pitches every few years. The rest of the pitches you will swing at are harder to hit.
Those fat pitches – the obvious ones – they don’t happen often enough. The right trend, the right management team, the right business, the right valuation, the right growth, the right margins, the right share structure, the right salaries, the right insider buying, the right incentives, the right board, the right auditor. No debt, no related party transactions, no hair, no red flags. Management is confident but not promotional, extremely long-term oriented but still willing to talk. They are so rare that you cautiously buy them because they look too good to be true. You take half a swing. You never own enough. If you could just go back in time and..