I love mining manias, and stories of the San Francisco gold rush can teach us many lessons of greed and emotional decision-making. People lost their minds, listened to no reason, and gambled away family fortunes, entire life savings and even got into debt, in their pursuit of the shiny, yellow metal in the fields of California.
But, here are three brand names, known to us all today, which trace their origin to the 1849 gold rush: Wells Fargo Bank, Ghirardelli Chocolate, and Levis Jeans Company.
The truth is that while the big money always seems to be with the prospectors, who strike it big, the risk is also the greatest with exploration.
It’s the same lure, which makes teenagers dream about becoming a rock star – the life, presented on TV looks incredible, but the many 1000s of failed musicians never get their 15 minutes of fame, so teenagers do not understand how wasteful it could be to pursue such a long shot, only to end with defeat. TV portrays only the success, without the journey.
The odds of success with exploring gold are slim (1 out of every 3,000 claims make an economic discovery).
But, what is definitely true is that all the population involved with mining needed a banking establishment, so Wells Fargo capitalized on the situation. Then, all the miners needed a sweet during their time-off, so Ghirardelli thrived and, what all prospectors, knee deep in the mud, really demanded, were work pants, which Levi Strauss understood.
In early 2016, I found out which company was becoming the modern-day Levis for crypto miners – a picks-and-shovels play on the blockchain revolution. My partner and I researched the origin of the graphics cards and hit a grand slam with NVIDIA.
As you can see, NVIDIA, since the time of my purchase, has gone from $35.00 per share to $243.00 today in just over a year – that’s a 594% gain – my personal biggest return on a blockchain company thus far.
When we launched the newsletter in early Q4, of 2017, days before the rush, the absolute mania lit up fireworks for the first time; NVIDIA was the debut opportunity we covered in the letter.
To me, it always makes more sense to be the casino, not the gambler. Wall Street is practically built on this principle. They provide the means by which gamblers play with tickers all their lives, while they bank cold, hard cash commissions, on all trades – good or bad.
Going back to today’s focus – since our NVIDIA alert, shares are up 68%:
The reason we are closing our position and ceasing coverage of this stock is that the growth prospects, from here on, are mediocre, at best. The pie has been eaten, and all that is left for the investors, who buy our shares, is the crumbs.
As you know, NVIDIA (NVDA) is a specialized semiconductor manufacturer. It is a relatively young company, founded in 1993, but its revenues are in the billions already.
Among the facts that the business reported many records in 2017, including on revenue, margin, and income, the market has over-priced future growth.
As an income investor, this is a no-brainer decision, since the yield is a lousy 0.24%, so with growth already fully priced, I have no incentive to remain an owner.
The P/E ratio is kissing 40 right now. In other words, if someone were to buy this business outright today and take it private, he would need to wait 40 years to recoup his investment, a mere 2.5% return, if the company doesn’t grow.
That’s ridiculous, yet every day, millions of shares are sold at these levels. When buyers are willing to overpay by this much and we’re sitting on giant gains, we need to seize the moment!
Going forward, Pure Blockchain Wealth sees NVIDIA continuing to grow, but since investors will, one day, realize they’re over-paying, more sellers will take the share price down to earth.
Like with anything, book gains when you get the chance!
68% in a little more than a year is 400% better than Warren Buffett’s track record of 17.94% over the course of his career, just to give you an idea of how to view our accomplishment – it’s no mean feat.
Remember this valuable lesson of investing – the strategy is to find great businesses trading for attractive prices. It doesn’t matter how good a company is if you overpay.
Dot.Com era investors in Microsoft learned this lesson the hard way, seeing a decade go by before they recouped their investment.
Let’s walk away from the table with our chips at hand (a 68% profit), and be on the prowl for our next big winner.
Best Regards,
Brad Robbins
President, PureBlockchainWealth.com
