I recently went over my Rules of thumb in this post, which gives an overview of how I approach the markets. If I were to summarise the piece, it would be "find hated sectors that are cyclical and positioned for or ideally in the process of inflecting."
In chart form it's this below (which is a company I'm going over today).
I'm ok with the occasional position that blows up in my face, as that's what position sizing is for. The real tormentor is the great set-ups that I understood, but for whatever reason, I didn't buy, and I have to grimace as I see where they now trade periodically.
One sector I’m trying to minimise my future regret is seismic companies.
I've laid out my reasoning for believing the high-demand energy/oil scenario will prove conservative (Coming Asian Boom).
Net-Zero isn't happening yet, capital continues to be allocated like it is, which is creating massive asymmetry if you have the patience to position for when reality will bite.
In terms of capital starvation, I'm not aware of a sector that's had a rougher time than marine seismic companies (yes, even worse than offshore drillers).
There were an estimated ~50 seismic companies around 2012–13, the attrition over the next decade was enormous. By 2023, well over half of those firms had disappeared or fundamentally changed: 30 companies exited the seismic business via bankruptcy, mergers, or shutdowns. This includes virtually all the new entrants from the boom years and many long-standing mid-tier players. The marine seismic segment saw the steepest consolidation.
I already own the two bottom crawlers in the sector, which, much to my surprise, have started to run.
I’m now buying another (in blue).
I'd previously passed on this company, but it has been cut in half over the last year due to entirely reversible screw-ups, which management is in the process of rectifying.
I'd argue all three of these businesses are high quality, they have just been in a sector devoid of any incremental capital for the last decade… Two of the businesses have a heavy technology focus, and I can easily see them fetching higher multiples as the spotlight comes on the sector.
It’s also my longer term aim to reduce my exposure to miners, to increase my quality of life and sleep if nothing else…
