Lithium miners boom/bust
Lithium is definitely a boom/bust segment of the market. Refer to the Galaxy (GXY.ASX) 10 year chart below for a perfect example.
The economist John Maynard Keynes put it best when he said that “The market can remain irrational longer than you can remain solvent”.
You could be absolutely ‘right’ and have bought GXY in 2009, or maybe bought GXY on the back-foot in 2011 as it fell to ‘cheaper prices’. However, they were very tough years in 2012/13/14/15. I have clients who held GXY through those years and I can assure you that it was not pretty and these investors were the strongest of devoted investors. Today’s prices do not make up for the pain and opportunity costs of those down years.
The next example that comes to mind is the Beta Vs. VHS examples of the 1980’s. While, apparently Beta was the better technology, VHS won – and apparently for rather novel reasons that we can discuss another time.
Another more recent examples is that Kodak invested digital cameras, had their strongest years only three years prior to near sudden-death thanks to sensor and operating software innovations coinciding with falling costs curves on in-phone digital cameras, touch-screens and sensors creating today’s smartphone/iphones.
The point is, that we have seen world-changing innovations many times before, only to be eclipsed by unexpected competitors.
While my background always creates a bias towards direct shares (like GXY etc) and trading thematic such as commodity tail-winds like Lithium or Cobalt, I cannot justify anything other than short-term trading for investments trading these cyclical, technological, or hyped thematics (that I trade with my own personal accounts and report on Talking Stock).
General advice is to actively trade the short-term cycles (like GXY) with diligent trading plans and stops. Alternatively for medium to long term investments; avoid hockey-stick projections (like GXY) and focus on proven business models with unusually strong/accurate forecasts and projections (CSL etc).
In saying that, in three or ten years’ time we could be wishing that we just bought any lithium miner with our ears pinned back – but that’s the hindsight of VHS!
Let me know if you’d like to discuss further.
GXY 10 year chart: