Rubbing my nose in some investment mistakes

Returning to a blog that hasn't been updated in over two years is like looking at one's questionable sartorial choices in old photographs.

One of Charlie Munger's most quoted, but perhaps least practiced observations, "I know I’ll perform better if I rub my nose in my mistakes" is apt.

Some of the portfolio decisions mentioned in the last two blog posts before this attempt to revive the blog, When the Facts Change... from March 2019, and When Deep Value Surfaces... from December 2018 provide plenty of soil in which to indulge in some nose-rubbing.

Caledonia Mining

The March 2019 post referenced what now seems a hasty sale of what had been a successful holding of this small-cap Zimbabwe-focused goal miner from 2016. Spooked by what turned out to be a temporary problem with power supply, and a fear of a dividend reduction that never came, that portion of my dividend-paying gold miners allocation went to Trans-Siberian Gold. Yet within a year I decided to reverse the trade and return to Caledonia as by early 2020 it was clear that the multi-year central shaft project was going to plan, and what has turned out to be five successive quarters of dividend increases was underway.

Although Caledonia has fallen some way from its peak of nearly £19 in July 2020 (against my January 2020 re-entry price of £7), today's announcement of the shaft completion and another dividend increase shows my original 2016 decision to invest in Caledonia should never have been reversed. 

Lesson: If the course of an investment is clear and the management displays consistent competence and transparency (as is the case here) then the inevitable minor squalls should be ridden through.

OPG Power Ventures: What was I thinking?

In late 2018 my search for dividend-paying deep value drew me towards OPG Power Ventures, a thermal power generator in India. Not for the first time, and probably not for the last time, an over-eagerness to move my capital towards perceived cheap dividend streams ultimately disappointed.

In summer 2019 OPG announced the divestment of a solar plant project and that it would be paying its dividend in scrip form rather than cash. As an early retiree cash dividends are paramount, so I sold the holding. On reflection an investment in coal power at a time of heightened environmental concerns was not wise. Harshly, the fact that by then the serial under-performer M&G Recovery fund had been a long-standing OPG holder could have been a warning against investing in the first place. I had also given insufficient attention to the considerable debt on the balance sheet, let alone the vagaries of coal pricing.

Although OPG shares are today about 15% higher than when sold, there have been no cash dividends since then.

Lesson: There are other, potentially more exciting, ways of securing income from emerging markets, not least Airtel Africa, of which more in a future blog post, perhaps.