Investing is not easy. Over and over again I experience it is another game to actually invest by yourself than what you can read in books or see in interviews. The uranium thesis can be bulletproof by itself, but outside factors always come into play. That makes holding on to winners a lot harder than people think.
I have spent a lot of time thinking about living with the volatility we have been through in the sector. How would I be able to hold on over a longer time period without going crazy? What is worse: selling out way too early, or outstaying your welcome? The most helpful article I have read about the subject is: Would You Have Made a Fortune in Uranium? (An article that is getting harder and harder to come by mainly because it is so old that many of the links are dead. You do however find the article as a PDF as the first result in google). I have returned to this article on several occasions to take stock of where we might be in the cycle, and more importantly, take stock of where my head is at.
I will not recap the article as I believe it should be read in its entirety. I will instead give it a very strong recommendation. I read it again today and it gives me a good indication of where we are in the cycle. The big questions the article asks is:
How would you react to catching a tiger by the tail? Assuming you had a good thesis, it started to be proved right, and your investment is now up significantly – Are you going to bail out or are you going to stay in? Or add to your positions? What information do you use to decide? Can you hold on to a big gain and not fear losing it?
The more experience I get, the more I am convinced that I need to keep my rule based parameters in advance for selling. I have to be content with selling most of my positions a long time before the top. I would rather sell 90% of my portfolio too early, then be stuck with 90% of my position after we have passed the actual top. Selling after you already have given back 50% of your returns is hard, even if it turns out that it continues to fall afterwards. (Something we are only going to know in retrospect). I know several people who have held on to positions down to zero because they did not want to realize a loss.
Another realization I have had is that if I hold too high allocation to the sector, I will be more inclined to sell early to lock in gains. Increasing allocation to other commodities, other sectors, or increasing my cash position is therefore not a bad idea. Something that has been a focus for me over the last year. Now the positions in some of my other commodities are big enough that I need to set up similar parameters to the ones I have for uranium. I hope with doing this I have come close to my “Goldilocks Zone”. Sitting 100% allocated to one sector is only feasible for a select few.
My risk tolerance is also not what it was in my 20s. (Like many other people I could live on basically zero if I wanted to). With responsibilities for home and family I can not put everything on the line like I could in the past. More money is going out each month, and more money has to be set aside for emergencies.
My allocation to uranium companies is pyramid shaped, with the majority of my funds to the (perceived) solid developers, then the more speculative developers, and lastly the most risky developers.
Since the last top during the fall of 2021 I have continued to invest heavily in the sector. Both in developers like Denison Mines, but also more to some of the more speculative explorers. I have also gone over which companies had the highest beta to the move in the spot price we saw August to September 2021, and added some funds there. The best performer I could find went up 275% in less than a month. I have added a bit to this company in the event that we will se a similar move soon.
Where the market moves the next couple of months will decide if I will continue to allocate more to the sector, continue to hold, or even start scaling back on my positions. Things change quickly in this sector, for better and worse. How you react to this is however your responsibility. A bull market wants to throw you off. The important thing is to hang on.