Catalysts, buybacks, and shipping stocks

Search for share cannibals

Catalyst events are the money multipliers in investing. A spark can transform a bottom fish stock into a profitable investment. Conversely, an idea without a catalyst can alter a brilliant analysis into a dead money trade.

Catalysts are an integral part of my investing process. There are two simple rules about them:

• No Catalyst, no Fun Rule: do not invest in ideas without catalysts

• Winnie the Pooh Rule: the more catalysts, the merrier.

The first rule tells us that without a catalyst on the horizon, we simply multiply by zero. Skipping that step in our process ends with a value trap in our book.

The second rule implies seeking not only one spark, let’s say, on a company level, but more. The rationale behind this is simple: High-order catalysts (on macro, geopolitical, and industry levels) lead to company-level catalysts like share buybacks, not vice…