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Buying Stories
This is often how most people start out in their trading or investing journey - they are drawn in by a compelling story. Sometimes it’s the promise of 'jam tomorrow'. It's a vision of what could be, rather than what is. Other times, the story rests on a genuinely solid investment thesis that unfolds over years or even decades.
At FoundryStrat, we’ve always acknowledged the power of a good story. Narratives drive markets as much as numbers do, shaping sentiment, behaviour, and ultimately price action. We’re big admirers of Peter Lynch and his investment philosophy, which embraced this dynamic. Lynch understood that many of the best opportunities begin as popular themes or emerging trends — what we might call “story stocks” today — and that behind some of those narratives lie truly enduring businesses.
So while stories can sometimes lead investors astray, they can also be the spark that ignites long-term success. The key is knowing when a story has substance — when it’s supported by earnings, cash flow, and competitive advantage — and when it’s just noise. That’s the distinction we try to make every day.
You’ll make mistakes — lots of them. In life, trading, and investing alike. Most of us start out by chasing a story: a headline, a hot tip, or a piece of news that sounds like monster profits are just around the corner. The FoundryStrat team have certainly been there.
One of our early encounters with a so-called “story stock” was Nautilus Minerals — an ocean gold miner promising to extract precious metals from the sea floor. It sounded revolutionary. Unfortunately, despite years of effort, the company never turned a profit, nor did it ever actually mine a gram of gold. The result: a complete loss of capital.
Mistakes like that can be painful, but they’re also invaluable — especially when they happen early in your investing career, when relatively little capital is at stake. Experience teaches you to separate narrative from substance, and that’s exactly how our process evolved.
Today, when we look at “story” names, we pair that excitement with rigorous fundamental analysis — we look under the bonnet. In early 2023, we were seriously analysing Palantir, a company using AI to help governments and corporates make sense of vast amounts of data. The story was compelling — and, crucially, the numbers were starting to line up. In February 2023, Palantir reported its first profitable quarter, signalling a meaningful shift in its fundamentals.
The growth opportunity was, and still is, enormous. The company had only just begun to penetrate the corporate market, with much of its early revenue coming from government contracts. That combination — a strong story, improving fundamentals, and growing client demand — is exactly the sort of setup Peter Lynch would have loved.
Since then, the position has risen over 2,000% in under three years. We’ve sold into strength but remain believers in the company’s long-term potential. At this stage, it’s effectively a free position — we’ve recovered our initial capital, so what remains is long-term upside. If we can continue to believe in the company’s vision and execution, Palantir becomes a genuine long-term buy-and-hold opportunity. The key from here is managing its weight within the overall portfolio — ensuring it remains a driver of performance without becoming a source of concentration risk. When it's more than 15% of our total portfolio, we start to trim and reduce it - locking in further profits.
These types of businesses often trade on high valuations — and Palantir is no exception. Story stocks always require a leap of faith. But when the story is backed by substance, that leap can be worth it.
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