valueinvestor
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Also it's great that you were able to experience regret, because I think that will drive you to make better decisions forward.
I can list my failures more than my successes, and probably to the public, I'm quite successful despite this. Warren I think is only right 2/3 times, possibly less. As I grow older, I find that these risks and massive failures I took when I was younger, gave me an inherent advantage over my competitors now and it still compounding.
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b]Falling for the bear market rally narrative
At the time it seemed reasonable to take advantage of the initial rally to raise some cash. Buffett was pretty bearish and most economists believed there was a strong possibility of a depression and the economy would take years to recover and most health experts warned that vaccines take years to develop. As such it seemed strange to see the market back trading at around 20x pre-COVID earnings and only 20% off pre-COVID highs.
What I should have done is focused on base cases. A 30% decline is pretty typical for bear markets and the base case after an event driven bear market is a sharp V shaped recovery. So there was every possibility that the market bottomed in March (as proved to be the case). Also while the health and economic uncertainty remained incredibly high most of the S&P 500 consisted of companies incredibly well positioned for the pandemic. And of course I should have expected that in a no-fault recession the governments and central banks worldwide would do whatever it takes to support markets and the economy.
Also even if the rally did reflect excessive optimism I should have realized that events could subsequently justify that optimism which turned out to the the case.
Of course turned out to be very costly because now I'm sitting in far too much cash and virtually everything is up over 50% or more from their 52w lows. And with the market showing no signs of slowing down watching the market continue to run away from me is increasingly painful and I am feeling very foolish.
On top of SD's advice - there are many stocks that are trading well below intrinsic value - you just need to find them. Found two. I almost decided to raise cash during the rally but when discussing with Viking, I remembered 90% of returns only come from 4-5 days of outperformance. I'm not confident enough to figure out which days will offer that solace, hence I stayed invested. I would advice the same.
This board brought a great idea - SNC-Lavalin and it still not too late to invest imho. Bought a bunch of OTM calls before the rally but there's still time. Not sure why I'm sharing, but I guess there's a heart in this greedy capitalist. Short term it may fluctuate, but long-term I think there's catalyst to unlock value. Downside protection is the toll route trophy asset within.
There's also a slight chance of bankruptcy, if another scandal arose, but that depends on your risk tolerance and what you conclude from your own due diligence.
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Selling entirely my huge 15% position in JD.com at $38 in April after holding it for two years from around $35. It trades at $100 now.
Why? The stock was flat since January while some of my other holdings like BAC and WFC were down 35% so I concluded the later had become relatively better investments and that it made sense to move capital towards the bigger bargains.
I was expecting China to be faring much worse than the US given that it was the original birthplace of the pandemic.
I was also convinced their weird looking number of cases/death charts were a fraud and the government was hiding a massive number of cases that was going to be revealed any day (I'm still fairly convinced the numbers were fake but they did end up controlling the epidemic very well moving away quickly from their first "cover up and deny everything" response, while on the other hand the US government... Well, let's not go there.)
Mistake The logic was flawed because I failed to recognize the crisis had not hurt all companies in the same way. Maybe one company deserves a -35% and another one 0% due to a specific set of new circumstances. Can't get stuck on old price targets when the world has clearly changed. I knew JD as an online retailer was founded during the Asian SARS crisis and I should have realized they would be very well equipped for this.
I'm with you. I haven't sold JD out of fear, bought actually during the scandal but should've kept it. Not sure why - but the stock seem to be perpetually undervalued relative to what it has as a company. JD Logistics and Health - still don't think the market is appreciating the strength of the business.
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Also to give the POV of you never know if it is a mistake(granted an oversimplification of their view) some credit - buying is step one. Step two is when to sell. Not sure if I would've kept it when these positions ripped up.
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One straightforward mistake that I made in 2020 was tactical, on the personal finance front - while I was re-allocating capital during the drawdown in March, I simply made selection changes in my kids 529 accounts to move them from cash to US equity, and after two such moves was told I was not allowed any more changes for 2020. Looking back, I missed out on pouring in the maximum allowed new annual contribution of $70,000 in each child's accounts simply because I took at face value what I was told on the phone and didn't think about pouring new money in. It would have made a world of difference to put more money in these tax-free Roth IRA like accounts with 10-15 year runways.
Another on specific company selection was missing out to emerging platform companies in my field of healthcare - not realizing how Teladoc is on its way to becoming one of the premier platform companies in telemedicine during the pandemic, while knowing well what it had done during the hurricanes in Texas and Puerto Rico. Why it happened - because I didn't think about long term effects of COVID-19, just focused on market timing in March and then held back when markets started going back up. Lesson learned - now I am looking closely at edu-tech companies on their way to becoming the platforms in higher education, TwoU being one of them that I hold - Coursera is another but is not publicly traded yet. Missing out on investing in Google at $1000-1200 was another hare-brained mistake, despite seeing how much of a moat Google was building in the classrooms from elementary education to graduate students.
The big picture lesson learned was that it is very difficult to think rationally on a consistent basis in the middle of a storm, there are so many things going on in life. There is a lot of value in thinking of how to make portfolio level changes well ahead of the year that lies ahead. This inspired me to take a course on Investment philosophies in Fall 2020 and reorganize my portfolio. I have also realized that the international financial system is inherently unstable, and hopefully, this means more opportunities lie ahead for the brave and well prepared.
Yea - there's no one saying that it's too late. It never is.
You're not the only one to take information at face value. My friend and I wanted to watch avengers, and I mentioned checking the showtimes to go and watch. She mentioned that she recently saw the trailer and it was due to come out a week later. I still told her to check, because it may be for other audiences - she said the trailer ran on a Canadian channel. Still asked to check anyways - turns out we were both right, in other cities, it was due on that date, but we were close to a theatre that had an early viewing.
Lesson: If the information does not come from primary information - take it with a grain of salt.
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Although I understand that the jury is out - that goes without saying. However, to say that some of these picks could be mistakes in the future is bonkers. Of course, you shouldn't let regret hold you back, but you shouldn't let blindness guide you forward.
We all have to work on incomplete information and we're all not psychics.
However, to say that jury still out on some of these picks where a 90% decline will only result in a 100% gain on the investment is ludicrous.
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This. You're right - many don't understand the implication that language and wording can have on a person's mind.
It lends perspective. Hence I've changed the title --- as suggested in the original post - it's not really about regret, nor mistakes, but rather what we can do to improve next time.
Fairfax has been firing on all cylinders for a while, and we're probably going to see a golden era for them soon, if not already.
Thumb sucking is one that I learned in 2008. Rectified by Bezos with the following passage:
“Most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.”
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Also to keep the thread organized - if willing, I would like to see:
1. What Happened?
2. Why it Happened?
3. How to rectify it in the future.
I mostly write these posts for myself, as I feel writing is an important aspect of clearing the mind of noise and solidify your thesis, while reinforcing good lessons and removing bad habits.
Here's your chance to do the same? ;D
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Honestly, if the 2020 episode worked out like 2008/2009, you would not be having these regrets.
It would've worked just fine imho. None of these companies mentioned with the exception of Wayfair required dilution to grow. Amazon worked out fine in 2008.
It's something that I've touched upon in prior posts, but not in depth where I entertained the possibility of being 2008. If it was greater than 2008, then we would've been screwed 10x and no investment (even cash) would've been safe except shorts - in that scenario.
Again I think as investors, we should optimize and get the most incredible bargains. We may not get it, but perfection is a race where there's no finish line. The purpose of this thread is to talk about how we can have done better, and I feel as such health is one of those important factors.
As for not knowing the world back then - you didn't really need to know. There were companies that were going to do fine through the pandemic, I didn't expect them to go 200-1000% in less than a year, but that's how it turned out.
As for companies such as Berry, and Dupont, there are technology suppliers to those companies that you know will grow tremendously well with greater upside potential. I think many are missing the fact that technology is not a novelty, but rather a increasingly important infrastructure asset to compete. Without cloud computing, I don't think some of these companies can survive.
The stuff that I regret is not buying more Ashtead. I regret not buying more Berry Global and DuPont at the low. Because I know those companies. They were existing portfolio companies that I knew were going to be 3-4x in 3-4 years. No balance sheet issues, good cashflow, etc. But I decided to diversify into a bit of growth.
I don't think that's a mistake, if you're managing client money. Especially if your world view is that it can get worse, I think it was admirable that you did your best to protect your client's interest. Not many do. I've met managers who would blow their fund up with risky positions because they can get bailed out by the government or family, and start afresh.
Was there anything else that prevented you from purchasing Ashtead?
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Sold a position in BYDDY bought at $5 because in April 2020 the outlook for EV and their other businesses seemed to be negative. Partly driven by wanting to raise cash.
Lesson is to not raise cash during a pandemic? I think it could've worked out for you, if it dipped again.
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Do you think there is anything about your process that you would have changed?
In general, I caution against drawing too many strong conclusions about your investment process during this particular market swing because I think it made a lot of people look silly and some of those people wouldn't look silly in an alternative version of events, whereas some of my decisions to hold on might look smart now but could have been disastrous.
Funny enough I've touched upon these scenarios, albeit facetiously in my prior posts. I think my investment process was the same, as mentioned it was diluted, because I was not myself. Hence, I wrote the post because not many talk about the importance of health and mental clarity.
As for the edge, again thinking longer than 1.5 years, as this iirc is the average holding period for an equity, as well as thinking about margin/cash-flow profiles ten years out helps. There were alternative scenarios where my investments would've looked disastrous but at the end of the day, if it was that bad - then every equity investment imho would've been disastrous, other than shorts/puts.
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Noooo! Damn. Just felt the pain reading that.
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Purchasing my fathers parents cottage with 5 acres on Georgian Bay Ontario in 1989 for $850K now worth over $10 million plus or more next door to Eatons summer residence and my place of birth Ugh!
How’s this a regret? Sounds great! Georgian Bay is beautiful! ;D
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Wondering if any of you had any investing regrets? I've been in the game for almost 5+ years, and sometimes I'm baffled at how stupid I am and was wondering if anyone had a similar circumstance.
Wanted to start a thread on mistakes so maybe future members can learn from - here's mine.
Investing Regret#1: Digital Turbine APPS
Why? I was looking at this company from 2018. I understood the mechanics of it and had a friend who worked there and told me assets that the market which was the synergies from the acquisition that they made. When it was trading at effectively 2-3x PE for a business growing 50% a year, it was incredibly stupid.
Why did I miss it? Possibly because I was distracted by my business, as I started one just before the pandemic, and I completely forgot the business existed. So much so that I invested in a basket of friggin Hotels, Cruises, Airlines, Subprime Lenders before transitioning into a long term portfolio.
What did I lose? 21x return.
Investing Regret#2: Wayfair
Why? I was invested already because I saw how much Amazon invested in furniture compared to Wayfair. Wayfair was investing 2x more. - sold because I was acting like a NAV investor than a value investor.
What did I lose? 10x return.
Investing Regret#3: Rubicon Project
Why? I invested when it was priced less than cash per share. I'm in the industry and knew that the business intimately and will turn around. Effectively priced single digit P/E. I sold again because I wanted to invest in a basked of FRIGGIN hotels, airplanes, subprime lenders, etc.
What did I lose? 30x returns
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Lesson:
Not sure, I was plain stupid - completely forgot about one of these names and the other two were because I thought downside was not capped, but looking back that was completely due to irrationality. I don't know why I wasn't able to figure out that Wayfair will sell more furnitures during the pandemic, it was a matter of waiting another quarter. Rubicon Project was from 2018 and my cost basis was so low, I'm not sure why I sold either. Other than that I sold (embarrassingly to say) because I salivated over the $0.50 cent hard asset dollars versus $0.25 cent soft discounted cash flow dollars.
What would I do differently:
Get ready for it. It's something that's not said often. I realized working more doesn't equate to more success, especially if it's at the expense of your health. My attention was massively handicapped by my business, as I started it just before the pandemic (impeccable timing right?). I was panicking - hence I was working 60-70 hours a week. Now I work 36 hours on the business, but the other hours is towards working out, taking classes, and overall self-development.
Sometimes the requirement of success for a venture is beyond capital and resources, sometimes it's just a matter of time. A good chunk of my business came from purely waiting and being ready to take on work. Sales cycles are funny that way. My team works at home, don't really have a schedule, and for all intensive purposes paid on the value they bring to their customers. They can travel and work remotely, all I ask is send a postcard. As Uncle Warren said, just because you get X women pregnant, doesn't mean you'll get the baby X months faster.
Hence, if I took better care of myself by working out, eating well, sleeping, as well as not stressing, I would've gotten to these conclusion faster. However since I was more/less a zombie - I put myself in a position to miss some perfect pitches.
I could've gotten away working 40 hours per week and putting the rest into physical well-being and health. Not saying working more hours doesn't have it's benefits, but at the time, I really had no reason to work that much - other than fear.
Although, I did tremendously well investment wise and more importantly business-wise in 2020 and I'm healthy in a world where some are really decimated by the pandemic, hence I'm not kicking myself too much. However, I kind of realized that as an investor, especially a long-term investor, health is quite important. Not everyone can be as amazing as Warren and have a diet full of processed food and sugars and still have god-like focus.
Hence, health is going to be a priority to me going forward. It was before, but it hasn't resonated and I guess I have to thank COVID. You can't be a great investor if you don't live long. Secondly you can't be a great investor if you're mental acuity is impaired because you're a caffeine-fueled, sleep deprived, fear-ridden zombie. That one lesson cost me hundreds of thousands, if not millions of dollars worth of returns.
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How did you get your first client? Secondly, it's next to impossible to raise capital on solely track record. However it's possible to raise capital without one. May not be a billion dollar round but turn one client into two, two into four, and four into eight.
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Mikhail Porter seems the person who ask the question - not sure why he felt the need to express his views on a conference call. It would've been more productive to ask why the mis-step and what will rectified in the future. I think Prem handled it very well, I wouldn't have been able to be as poised in that situation.
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That’s the point regardless of the why - whether he wanted to be the destroyer of capital or a hero amongst the people, maybe the truth is in the middle - no one can blame him for their mistake. He didn’t point a gun at them.
there is a lot of "hey look at me" on twitter...influencers come to investing. reminds me of blodget though his only mic was cnbc....twitter and reddit much more powerful
Considering HF are modeling Reddit posts for their trades. Can’t disagree.
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And maybe you’re “clueless” to me? That’s okay, right?
Kidding. Just being cheeky. ;D Thank you for taking the time to discuss. :)
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That’s the point regardless of the why - whether he wanted to be the destroyer of capital or a hero amongst the people, maybe the truth is in the middle - no one can blame him for their mistake. He didn’t point a gun at them.
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I thought the GME Call buying tweet was irresponsible. A lot of people were hurt around that frenzy. It didn't need anymore fuel.
I don't think it's Chamath's fault if someone invests their life savings over a tweet.
He also went on air and mentioned he sold out - stock still went up. I guess it's his fault too?
How's this different from Prem announcing a stake in Blackberry? Not to be vindictive - truly not, but I want to challenge your point. People who followed them into those investment loss quite a bit too. People should be responsible for their own capital, as we're in a capitalist economy.
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What damage?
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I wouldn't underestimate his ability to succeed. He came from nothing, left a secured job in finance for Silicon Valley, then left a secured job in Silicon Valley to work at Facebook. He's used to making decisions that make no sense in the beginning but works out tremendously. How many do you know would do the above?
When listening to him speak, he seems wicked smart. Although some of what he does not make sense, how many others pulled a move like that and still succeeded? Warren Buffet with Berkshire or Bill with Target/Valeant.
Seems to care about giving back with Social Capital and possibly running for governor.
As for Box, I listened to the Sohn Conference and yes - the pitch I thought was assumptive, but if Box was his worst investment - 18% five-year cagr, then he's doing way better than most money managers.
Disclosure: I'm a Chamath/Elon Fan Boy.
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"Can anyone on this board tell me that 99% of their performance come from more than three stocks? Genuinely want to know - typically I find my best idea account for 90% of my performance, also 90% of my loss"
Performance can also come from strategic overlays.
Example: FFH. Cash parking spot for us, since mid December through to about the end of next week. Four trades, an entry, a short-term BB driven swing trade, and an exit. Yet our 'all in' return will be around 25-30% - on simply cash management.
We prefer concentrated portfolio's, but strategic overlays are part of the return - occasionally, most of it.
Sometimes it goes your way, sometimes not so much.
SD
Agreed, but it typically is reserved for volatile times no? Unless you're able to do this every year? I typically reserve those in the workout basket.
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I find it funny when people say they’ve trimmed their winners because I read it as they’re reinvesting in their losers. I think the better approach is to have more capital coming in and invest when it’s dips. Sometimes if I felt my initial purchase was high, I would just have an appropriate cash position.
One might say it’s better to invest in second best idea, but I say if it’s not first - it’s last.
Can one have failures? Yes. I’ve invested in ~30% of my portfolio in Valeant @ $220, iirc. Reinvested at subsequent dips and still made it out okay. However, it allowed me to learn and still beat the market by a large margin. Valeant wasn’t my only colossal failure either.
If you’re going to diversify more than 3-5 stocks, I would rather index. The time spent to keep on top of these companies plus their competition, as well as any new news that can have a major effect on the price is difficult. I have a hard time managing 3.
Can anyone on this board tell me that 99% of their performance come from more than three stocks? Genuinely want to know - typically I find my best idea account for 90% of my performance, also 90% of my loss.
What are you buying today?
in General Discussion
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