Ironbark Zinc (IBG.AU)

This is a stock with the potential to be enormous and I'm buying it like there is no tomorrow.

The resource is enormous.  The weather conditions despite being so close to the North Pole has less technical difficulties than Teck's zinc project in Alaska.  Glencore and Nyrstar have got a very firm grip on it.  (Nyrstar do have a non-dilute you need to factor in) The NFM group have agreed to finance 70% of the project through debt-financing.  Zinc fundamentals is expected to be very favourable in 18 months.

(Click here for IBG.AU on Google Finance)

In short - this can be >20x bagger stock.

The skills you need

To succeed in the stockmarket, you need quite a variety of skills.  You need to have the ability to focus on a particular detail with such intensity as if it were the only determining factor and then at the snap of your fingers focus out and see the bigger picture.

You need to be analytical, technical, yet realise heck the four most dangerous words in finance is "this time it's different".  I could go on - for example independent thinking, filtering out junk, correctly putting weights on certain information etc. but the MOST important quality is honesty.

Honesty to yourself.  It is natural for an individual to have a bias but you need to be able to see through your own bias (to be honest, a stronger word is in order - think bull).  If you can't even see through your own 'bias' you are useless and you are just sheep waiting to be slaughtered.

Surprisingly people think they know their bias, but when the heat is up and the stress is on, they can't smell their own b..ias for their life.  This is true of many professionals!

Julian Robertson the legendary hedge fund investor I believe calls it "pure salmon honesty".

Ahead of the curve

In simple terms, it comes down to the law of diffusion for innovation.

Basically, our population can be divided into 5 categories:

The innovators (2.5% of the population)
Early adopters (13.5%)
Early majority (34%)
Late majority (34%)
Laggards (16%)

Imagine for a second you had 5 investors trapped on an island and you calculated the average return of their portfolios. By definition, someone will be above the average and someone below.  In real life, the average is approximately reflected by a stock market index and outperformance is what we geeks call alpha. However, alpha is a zero sum game. If someone beat the average, it came from someone’s underperformance.

The question follows - so how do I ensure I'm generating alpha?

Looking back at the law of diffusion we can derive a few things. To me, it implies that to succeed in this system we need to be:

• independent thinkers
• speed is an attribute
• know at all times where we stand

Because even if we are past the late majority and bordering on laggards, in the financial market, you can just do the opposite i.e. sell short instead of buy.
So that means if you find a guy on the street who is always wrong in the market, do not laugh at him! Treasure him with all you have or better introduce him to me!  It’s the ones who score 50%/50% all the time that are useless!