If there is one trait that can be picked from the earlier examples, it is the fact that Jim Rogers enjoys swimming against the tide.
Rogers’ thought process is marked more by skepticism and contrarianism than conformity. Having said that, he pays a lot of attention to research. He has stated that he was always willing and able to work harder than others.
This characteristic is evident in his personal life too. According to the New York Times, he spent 6 years looking for the right home. In 1977, when the real estate market collapsed, he picked up a home on New York’s Riverside Drive for $107,300. In 2008, he sold it for $15.75 million.
Below are some of his principles explained in his book Street Smarts.
- If you want to be lucky, do your homework.
When his bet on Helmerich & Payne, a contract drilling company, paid off, a friend attributed his success to luck. Rogers invested when business was bad but understood that the fundamentals were right.
Get the fundamentals right and the good news keeps coming. Lucky? If you want to be lucky, do your homework.
When he was at Yale, one of his classmates said that he would study 5 hours for a particular test because he thought the test was worth that many hours of study.
I found his reasoning peculiar. My approach was to study as much as was necessary until I knew the subject, and then study some more just to be sure. There is no such thing as enough. You keep studying, or working, or researching, whatever the task happens to be.
- Don’t go overboard with diversification.
If I were to tell you that you could only make 25 investments in your lifetime, chances are you would be extremely careful about investing. Invest very rarely.
If you buy 10 different stocks, chances are some will be good. You are not going to go broke, but you are not going to make a lot of money, either.
The way to get rich is to find what is good, focus on it, and concentrate your resources there.
But make very sure you are right. Because it is also a fast way to go broke.
- Don’t let a bull market deceive you.
His mother called him saying she wanted to buy a stock and when he asked her why, she said because it tripled over the last year. His response was that you don’t buy a stock because it has tripled, you buy it before it has done so.
There is nothing quite like a bull market to make people think they are smart.
All big bull markets, secular bull markets, end in a bubble. Everyone chases the conventional wisdom, following what they read in the press, and that presents the smart investor with opportunities.
He called the commodities boom in the late '90s, launching the Rogers International Commodity Index in 1998 before the mania hit the streets in the 2000s.
During the peak of the housing bubble, he was once again shorting. In an interview, his response to the question on whether or not he was shorting real estate: “Yes, yes, 2006, 2007, 2008. Yes, yes. I was short Fannie Mae, I was short all of the investment banks. I was short all the banks.”
It’s not just about taking a call; one must have the patience to execute a trade or investment.
Early in his career, he shorted 6 different companies anticipating a drop. As the companies’ stock prices continued to rise, he was forced to keep covering his shorts because he did not have sufficient holdings in his brokerage account to hang on until prices began to fall. He did not have the staying power and the resources that short selling requires. He reversed his position and lost everything. Within the next two to three years, every one of those 6 companies went bankrupt. So his call proved to be right, the timing was not.
One of the more obvious mistakes I had made in shorting those six companies was assuming that everybody knew what I knew. I had come in much too early. Since then I have learned to wait, or try to, at any rate.
Most successful investors do nothing most of the time. Do not confuse movement with action. Know when to sit and wait.
That, seems to be the most difficult lesson of all.
