The “Croc” way
On crocodile hunting wildebeasts, eating half the weight of its body, digesting it almost in full and surviving more than a year without food.
“In order to succeed you must first survive.”
Warren Buffett and Nassim Taleb
Crocodile secrets of survival
Though the crocodile’s ancestry dates back 200 million years, the crocodile, as we know it today, first evolved about 80 million years ago. According to the fossil record, their body plan has changed little since, enabling them to outlive the dinosaurs and become the most advanced of all reptiles and the most successful freshwater predator.
There is no single secret to the crocodile’s success. With few natural predators, a permanent armor of bony plates covering most of its body and strong jaw muscles capable of crushing anything from bones to cast iron, the croc is an extremely tough and robust creature. A croc can survive even after serious injuries such as a torn off limbs or tail and has a powerful immune system that helps it survive for decades.
But its adaptations go beyond being hardy. One of the keys to its survival is something one might think of as primitive: cold-bloodedness. Like all reptiles, crocs are ectotherms, which means they must gather heat from their environment. Crocodiles have developed behaviors to control their body thermostat: they bask in the sun when cool and seek shade or water when hot. Ectotherms like crocs don’t need to eat regularly to warm their bodies, and so they save an enormous amount of energy that can be put to other use or stored for later. A croc’s metabolism is so evolved that its body uses and stores nearly the entirety of the food it consumes. This is one reason why larger crocodiles can go for over a year without eating a meal. In extreme situations, crocodiles appear to be able to shut down and live off their own tissue for a long period of time.
Nile crocodiles are opportunistic apex predators. A very aggressive species of crocodile, they are capable of taking almost any animal within their range. They are generalists, taking a variety of prey. The diet of the Nile crocodile is mainly fish, but it will attack almost anything unfortunate enough to cross its path, including zebras, small hippos, porcupines, birds, and other crocodiles. It will also scavenge carrion, and can eat up to half its body weight at a feeding.
Generally, Nile crocodiles are relatively inert creatures, as are most crocodilians and other large, cold-blooded creatures. Although they can remain practically motionless for hours on end, whether basking or sitting in shallows, Nile crocodiles are said to be constantly aware of their surroundings and aware of the presence of other animals.
They are ambush predators that can wait for hours, days, and even weeks for the suitable moment to attack. They are agile predators and wait for the opportunity for a prey item to come well within attack range. Even swift prey are not immune to attack. Like other crocodiles, Nile crocodiles have an extremely powerful bite that is unique among all animals, and sharp, conical teeth that sink into flesh, allowing for a grip that is almost impossible to loosen. They can apply high levels of force for extended periods of time, a great advantage for holding down large prey underwater to drown.
They have an ectothermic metabolism, so can survive for long periods between meals eating up to half their body weight at a time.
The wildebeast herd crossing the river Masai Mara twice per year, resembles to me the market participants rushing to exit their investments when the next crash has arrived. Check out the video below for getting it visual.
So how can we emulate the crocodile patience and ferocious attitude when we invest? In the next section below I will suggest you several tactics you can use and apply in practice.
“Croc” a stock
On how to mimic in practice the crocodile tactics
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
Warren Buffett
Investment strategies and tactics equivalent
Invest like a croc eats
Like a crocodile watching out on for its prey, an investor should keep constant eye on its potential target investments. The croc knows that he has to be patient and get ready to attack when the right time has come. Likewise an investor should be ready to strike financially and above all else psychologically. One of the keys to long term investor success is something one might think of as primitive: cold-bloodedness.
An investor should develop behavior to control their portfolio. They should lurk in the shadows when the markets are shining red hot, and bask with their “jaws” wide open when the next crash arrives. This is want Charlie Munger calls “sit on your ass investing”. You don’t need to invest regularly the earnings/dividends you collect to grow your portfolio. Thus you can save a sizable amount of cash that can be put to use when the next downturn materializes. Keep the “powder dry”!
Building portfolio in the “Dogs of the Dow” style
I bet you are familiar with the “Dogs of the Dow” idea. This of course is difficult to apply as it involves high portfolio rotation and costs. But here is a close alternative, actually one of my favorites, as it is close to the “sit on your ass” patient investing idea. Make a target watch-list portfolio and set “52 week low” alerts to be received by mail. A good option to use is FT.com. The portfolio building options are wide ranging providing statistics on transactions, current pricing, ratios, dividend transactions’ allocations, etc. Once the next crash (doesn’t have to be market wide) comes along you will see the 52 week low alert mails start landing in your inbox. So prepare yourself and attack. Buy the “drowning” stock and feed your portfolio at a marked down price!
Pledge your current portfolio, borrowing up to 50% of its value.
Just like the crocodile eating half of its weight at a time, prepare yourself to invest a sizable amount when the time is right. Either by saving and stockpiling your dividends or borrowing up to 50% of your portfolio and that should be without margin calls.
Soon will add more! Send me your ideas too. As I like to say, small minds discuss people, average minds discuss events and great minds discuss ideas!