#70 - Dont Look

Price doesn’t matter

The cynic knows the price of everything and the value of nothing.

Ever since I started steering my portfolio towards quality, long-term compounders, I started thinking about how to judge my performance without looking at the stock prices of my holdings.

It might seem counter-intuitive at first, but as a (hopefully) perpetual holder, the price currently agreed upon by the market really has no bearing on the businesses I own. I don’t care about it - I have no reason to!

One exception I think of would be if the price given by the market was egregiously high AND if I had better much better-looking reinvestment opportunities elsewhere.

The other one is if my company is buying back shares, then I’d like to know that the price is low enough for that investment to be interesting.

But if I choose my stocks correctly at the time of buying, both of these should be a rare occurrence.

So again: if I don’t intend to sell, what’s the point of looking at the price? There is none.

Cash flow per share matters

So how do I judge how well I’m doing? Easy. As an owner, all I care about is how much money I can take out of the business after everything is paid for (free cash flow), compared to what I put in.

Let’s take the example of Mako Mining $MKO.V, one of my companies.

I purchased my shares for an average cost of CA$0.31, most of them during the year 2022.

How much cash flow am I getting in exchange?

Last quarter’s (2022Q2) cashflow break downs like this:

7.5 [mine OCF] - 1.0 [royalties & taxes] - 1.9 [capex] - 1.7 [debt repayment] = CA$3.8

Or a run rate FCFE of ~$CA15M.

Divided by 657M shares, that’s CA$0.023/share.

Therefore I’m getting a 7.5% annual return on my money (0.023 / 0.31).

It’s decent, but it’s not amazing. If the price of gold goes lower, it will become a shitty return.

Of course, growth is a big part of the story here, and if/when cashflow doubles, I’ll be a happy camper.

And I don’t have to look at the price for an of this.