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Mrs. Groovy and I have drunk copious amounts of index-fund Kool-Aid. We are Bogleheads through and through. As such, nearly 100 percent of our investment portfolio is devoted to just two funds: a total stock market index fund and a total bond market index fund.
But we do have a small amount of our investment portfolio devoted to what we call the Groovy Fund.
The Groovy Fund was started in 2013 and it comprises just one stock. The name of the stock is Lithium Americas. Its trading symbol on the NYSE is LAC.
We started the Groovy Fund for one simple reason. I was perusing the MIT Technology Review online back in 2013 and I came across an article that predicted there might be a lithium shortage if electric cars ever went mainstream. So I did some research on lithium mining stocks and I discovered LAC. It was trading at $0.85 a share back then.
Next, I took this information to Mrs. Groovy and opined that LAC might be worth the risk. She agreed and we started the Groovy Fund with a $20,000 investment in LAC.
Since our initial investment back in 2013, we have bought several dips and invested an additional $11,450. For a while, Mrs. Groovy and I looked like rockstar fund managers. In November of 2017, LAC reached an all-time high of $10.73 per share. But alas, Mrs. Groovy and I are no Ray Dalio. Apparently, lithium is rather hard to produce. From the halcyon days of November 2017, LAC has steadily fallen and now languishes in the $3 per share range.
Damn! No one ever told me that being a fund manager was so hard.
What I want to do going forward is to provide you with periodic updates on the status of the Groovy Fund. Such a practice should supply many teachable moments on the dangers of individual stock picking.
With that said, then, here’s the status of the Groovy Fund as of 12/20/2019.
| Stock | Shares | Average Purchase Price Per Share | Current Price Per Share | Gain/Loss | LAC YTD Return | VTSAX YTD Return |
|---|---|---|---|---|---|---|
| Lithium Americas (LAC - NYSE) | 17,000 | $1.850 | $3.155 | $22,184.33 | -2.62% | 27.16% |
Groovy Fund Guidance
Mrs. Groovy and I still believe that LAC will be our lottery ticket. If it ever does begin to produce battery-grade lithium, there’s no reason why it can’t shoot up to $20 or $25 per share in the next year or so. And if Tesla does manage to make electric cars mainstream in the next five years or so, there’s no reason why LAC can’t shoot up to $50 or $60 per share.
But those are very big ifs. LAC will thus remain a shaky bet for the foreseeable future. Here are three more reasons why that’s the case.
- LAC is a Canadian company that has joined forces with a Chinese company to turn a large lithium deposit in Argentina into battery-grade lithium. What could possibly go wrong? At one point, the first batch of battery-grade lithium was to come online in 2020. That milestone has been pushed back to early 2021.
- LAC also owns a large lithium deposit in Nevada, right down the road from Tesla’s gigafactory. But the permitting for that mining operation hasn’t been approved yet and LAC doesn’t have enough of its own money to get the mining operation going. It needs a partner and no partner has come forward to date.
- Finally, there’s no guarantee that the lithium-ion battery will remain the premier battery in the energy storage field. A lot of smart people are working on battery technology. IBM, for instance, just announced a battery breakthrough that relies on sea minerals, not lithium. And the inventor of the lithium-ion battery, John B. Goodenough, is working on a glass battery that can use sodium rather than lithium. Will the lithium-ion battery be supplanted in the next year or two? Probably not. In the next five or ten years? Hard to say. But I’m nervous.
Final Thoughts
Under no circumstances should you invest in single stocks, much less LAC. Mrs. Groovy and I began investing in LAC on a whim. The extent of my due diligence amounted to reading one online article. So never forget that I’m just some schmuck blogger from North Carolina. In other words, I don’t know my proverbial arse from my proverbial elbow when it comes to picking individual stocks. I’m not another Ray Dalio, I’m not another Warren Buffett, and I’m certainly not another E.F. Hutton.
Okay, groovy freedomist, that’s all I got. Let me know what you think of the Groovy Fund when you get a chance. Peace.
Risky but I like it!
I have actually seen a few other bloggers place huge bets on single stocks as well. Some had invested over 50% of their portfolio in one stock or fund.
J. Money of Budgets are Sexy once said he wasn’t diversified at all with his money until he invested in real estate.
I’m breaking out the popcorn and looking forward to see what happens here.
Greenbacks Magnet recently posted…Expensive Cars Are Masquerading Around As Signs Of Wealth
I was trying to figure your 6 year annualized rate of return because I strongly disagree with your “under no circumstances should you invest in single stocks” statement. But I couldn’t do it, and here’s why…if LAC was at .85/sh., your $20,000 original investment would have purchased 23,500 shares, plus the additional shares you acquired with your subsequent $11,450 invested. How then do you only own 17,000 shares?
Hey, Tony. Good question. It’s really messed up because LAC did a 5-to-1 reverse split to get on the New York stock exchange. When we first began investing in LAC it was $0.16 per share. Times that share price by five and you get $0.80. I don’t remember the exact year, but I think LAC did the reverse split in 2017. Anyway, we have 17,000 shares and the average purchase price per share is $1.85. Right now the price per share is $3.52. It’s had a nice run-up so far this year. Our capital gain as of today is $23,390. That looks like an annual return of roughly 13 percent for the past six years. I hope that clears things up a little. Thanks for stopping by, my friend. Cheers.
What you call your Groovy Fund, I call my gamble stocks. I bet, and lost, on many of them over the years. I heard Cramer suggest that such a fund should never be more than 5% of your net worth, but if can’t be a bogglehead, then this might help you do that with the other 95%. That’s where I’ve been. Lately, I’ve just move those gambles to REITs and high dividend yield stocks.
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Excellent point, GXF. Only gamble with money you can afford to lose. Thankfully, Mrs. Groovy and I aren’t complete fools. Our lithium “investment” is way below 5 percent of our portfolio. Thanks for stopping by, my friend. Cheers.
If you’re gambling, then you need to manage risk/reward such that expected gain is positive. And/Or possess some expertise that advantages you over other securities analysts. I’m not Ben Graham and I’ve demonstrated this by losing money buying individual equities.
I stick with index funds and real estate. Though renting has more risk than VTSAX it’s less correlated with equities than bonds. And I understand landlording better than lithium or manufacturing or other businesses. That said, it’s the end of the year, I should rebalance my portfolio, and I’m looking to buy another house…
Agree 100 percent. Mrs. G and I realize we are gambling. We don’t want to lose $31,450. But if we did, it wouldn’t be the end of our financial world. Managed stupidity is what makes life fun and interesting. And our lithium “investment” is a perfect example of managed stupidity.
If it were me I would take out my $20,000 and let the gain ride. Easier to play with a flyer when it’s house money at risk.
I hear ya, my friend, but I can’t. Taking out my initial $20,000 would wipe out my Obamacare subsidy. The effective tax rate would be close to 100 percent.
i am an individual stock investor. i’ve had albermerle (ALB) on a watch list. they keep growing their dividend
i’ll keep picking stocks and see how we do. i put the whole dum-dum misguided portfolio on the blog for transparency. we’re up 56% this year.
freddy smidlap recently posted…2019 End Year End Money Moves to Consider
Yep, Albermarle is one of the big players in the lithium industry. If EVs ever become mainstream, Albermarle’s owners are going to do extremely well.
I don’t get your math Mr. Groovy. Your average share price has almost doubled, and you have made over $22k, but your year to date return is in the negative. How is that.
I agree that everyday schmucks like us shouldn’t stake our fortunes on individual stocks, but this one (in hindsight) does look like a winner.
Oh wait. YTD means THIS year, not cumulative.
Good catch. In November of 2017, I was up over 500 percent. I really felt like E.F. Hutton back then. But then reality caught up with me and LAC. Hopefully, in the next couple of years, things will reverse course and I’ll be E.F. Hutton again. Thanks for stopping by, my friend.
Yep. Just showing the return for this year.
A safer way to speculate on promising ideas is to spread your $20,000 among 10 small companies. Even if you just have 500 shares of a $1 stock that takes off like Netflix or Apple, you will make a fortune and you will not even miss the money you lost on the other 9 stocks. By owning 10 unrelated companies, you multiply your chances that you will find one (or two) companies that put it all together for a huge success. Also be prepared to wait 5 to 10 years for this to play out.
“By owning 10 unrelated companies, you multiply your chances that you will find one (or two) companies that put it all together for a huge success. Also be prepared to wait 5 to 10 years for this to play out.”
I like it. You’re a wise man, my friend.
Good job on sticking to only one stock. Most people have some success with one, and one becomes two, and two becomes a day trading fiasco with penny stocks flying everywhere.
I remember buying my first stock “on a whim”. Krispy Kreme. Nevermind there aren’t any here in VT and I’d never been in one, I’d heard they were awesome and even had a HOT sign in front of their stores to indicate freshly made donuts. That had to be the future! A few months later my wife points to a TV in a lounge we’re walking by and asks “don’t we own that?”. The headline read “KKD plunges 40%” That marked the end of my lazy stock buying days.
LOL! Thanks for sharing your Krispy Kreme story. I had a similar experience in the 90s. My dad and I invested $5,000 each in–get this–a company that was making a lotion to combat erectile dysfunction. I don’t remember exactly what happened, maybe the little blue pill got FDA approval, but our investment quickly went to zero. Hey, I know this is out of leftfield, but are you familiar with the fellow Vermonter Styxhexenhammer666? He’s a libertarian nut, but I get a kick out of him. Here’s a link if you want to check him out.
Styxhexenhammer666
Doesn’t EVERY lotion combat erectile dysfunction? Haha…. and I’ll check out that other Vermonter with the indecipherable name.
LOL! Nice counterpoint, my friend.
Interesting, a few miles from our house a competitor to your lithium company is starting up a small semiworks lithium extraction plant. We live over a huge underground brine field that supplies most of the country’s bromine but also contains lithium salts. If their technology proves economical it could change the world lithium supply and demand balance.
Thanks, Steveark. You just ruined my transition to 2020.