Portfolio update #3; Long tails

Putting small portfolio weights in (less)/(un)proven names with huge optionality / runways for value creation. This week I added another such stock.

This week, legendary nanocap investor Dan Schum posted his annual performance letter on his site; NoNameStocks.com. As usual, it is a most-enjoyable read.

Dan buys dozens of highly illiquid stocks, employing a strategy of, “…capturing enough huge winners to make up for all the losers…”. I employ a similar strategy with part of my portfolio. I try to identify stocks with huge optionality or value creation potential. As many of these companies tend to be very small and/or unproven, I tend to start them at small initial portfolio weights.

In my experience, in many cases you only gradually find out how good a company and its executive team are, over time. As a consequence, there is a lot to say for starting (certain) positions small, and expand them over time if/when the story develops along the lines of the investment thesis… and preferrably better than that.

This week, I added another such position;