Junk Volume

When you "do more" but don't have anything to show for it

I’m going to do my best to utilize a lifting analogy for this one so bare with me, especially if you aren’t a person who workouts or doesn’t workout often. I swear this is related to investing.

Many people start their lifting journey by just trying to get in shape or are seeking some attention from a potential partner. Back in my mid 20s, I was overweight. The lack of physical activity and poor diet had caught up to me and I had decided it was time to do something about it. If I remember correctly, my goal was to lose approximately 30 lbs. I tackled this in two ways:

1. Track calories. Tracking would force me to see how much  I was consuming vs how much my lifestyle demanded. 

2. Build a habit of showing up to the gym 4 days per week. At first it was just 4 days of cardio.

Once I implemented and committed to  these two things, I dropped the 30 lbs fairly quickly. With the habit of showing up to the gym 4 days per week, I started incorporating resistance training. I got hooked on lifting and strength training. Moving weight with my body was addictive. I continued to push myself harder and harder. I fine tuned my diet a bit and put on some muscle. For the next 2-3 years, my weight stayed within a 5-10 lb range and I started noticing more physical changes to my body. . 

However, I eventually hit a wall. The newbie gains were gone and it was harder and harder to get stronger and continue to add muscle. At the time, my thought process was that  if I did more training to get from A to B then doing even more training would get me from B to C. Therefore, I upped the intensity and, ultimately, fizzled out hard. This was my first experience with junk volume. 

It turned out that as I continued to push my body harder and harder, I couldn’t recover from the stress I was demanding of my body. Much of my working out turned out to be “junk volume”. I use this term as “doing more without getting more” from what you are doing. This wasn’t getting less on a marginal basis, this was actually going backwards. If I wanted to get stronger, I had to get smarter both inside and outside the gym. Sleep, diet, training load and programming needed to get better.

What does this have to do with investing?

I always go back to the book Deep Work by Cal Newport. I can only do so much Deep Work in a day and operate at a high level (or at least a high level for me).

For me personally, I define junk volume for investing as putting in many extra hours and seeing no (or potentially) negative results. Here are some real life examples that I came up with.

1) Spending too much time on a specific company.

This is when I spend too much time on a specific company and become “overly” confident or  have a false confidence in the company. I keep digging and digging on a company, past what builds enough conviction to hold it, that I end up building an echo chamber. It’s hard to tell when you go past the point of research and  get too invested in a specific business. There is a difference between buy and forget vs buy and hold vs buy and pragmatically monitor. 

Some personal examples of when I was too close to a company and was overconfident due to how well I thought I was “informed”:

1. Holding STC.to after the S2S acquisition. All SaaS companies were getting bid up to crazy levels. I kept thinking that yes valuations are stretched, but my company isn’t “as expensive” as other big names. 

2. Holding onto NEW.to in 2013/14 (now delisted) without a runway to profitability. 

3. Owning OML.to (2016/17) after realizing the business was not as high quality as I originally thought. Though I still made some money on the name, I left more money on the table than I should have given what I had learned. 

2) Spending too much time on macro. 

This is probably anything over 15-20 minutes per week. Yes, macro is important, but I will never be able to be a macro investor and that’s OK. I look at it this way, what are the key items (inflation, interest rates, commodity prices, etc) and what are the expectations? If there is a obvious polarized opinion in the market, then I may look deeper. The macro that I do tend to be more focused on are longer term trends (aging population, underinvestment in energy, continuing trend of increase in consumption coming from developing countries, increase in immigration, etc.)

1. When I was paying too much time on macro was during the later days of the pandemic. I was looking at each inflation data point and trying to dissect the drivers. Really, I could have summed it up like this: “The shutdowns, no interest rates, stimmies and staggered reopening created some distortions. We went from no inflation to high inflation and are now down from the peak yoy inflation but are still at higher than typical inflation compared to the last decade. “ 

2. The fixation on extremely short term data points cost me to sit on my hands too much when oil went negative and not take advantage of opportunities right in front of me that I could have easily researched in the energy space. When I did enter my OFS basket trade, I re-entered too quickly, I should have staggered entry points. 

3) Over transacting in my portfolio.

Over transacting is quite easy to spot with hindsight. In this point I’m not talking about selling when I should have held, that is another post. I’m talking about getting too cute with the position such as,  trying to time temporary peaks and troughs. Trying to time a 10% pullback in the position isn’t for me. If you can do it successfully, I’m happy for you.

I consider my timeline for investments in the 9-36 month range when I take a position. I shouldn’t be too focused on next quarter’s results, but thinking “what does the quarter 2 years from now look like?”

1. I have personally over transacted with holdings throughout my journey. This has happened with companies such as XPEL, CPH.to, MCB.to. I feel things get “over extended” because someone on X said so. Then I take some off the table and regret it later.

Closing Thoughts

Though many of you may do this investing thing as a day job, I do not. Yes I could spend all day, every day, digging and digging but I find that once my brain is full I need to switch to something else. This is usually something that has nothing to do with finance. I have, personally, found having a productive outlet such as woodworking, lifting, reading and volunteering provides a guard rail from going overboard with finance. Being able to have something outside of investing gives me the space and time to process the information of the day and keeps me from engaging too much in junk volume. Much like my initial journey with strength training, doing more does not always equal optimal results. 

Do you have examples of junk volume? I would love to hear about them.

Thanks for reading

Dean