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Your biggest misses in 2014


muscleman
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I will start with mine.

I looked at Land's End when it was about to be spun off. I had not much idea how to do valuation on this company. I passed. It was 26 in April and now it is 52. Still don't know how to catch it from hindsight but would like to be enlightened if someone could help.

 

Subaru: As an auto fan, I had no clue why I missed to look at this one when I have looked at GM and Fiat and Renault and all others. Subaru's return is definitely the greatest compared to the other car markers. 700% from 2013 Jan to today. :o

 

ZTS and Allergan: Looked at it after Bill Ackman took a stake. Didn't have any clue how to evaluate the down side.

 

 

 

 

 

 

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I didn’t expect Brindle’s sudden departure from Lancashire… I was utterly unprepared and had to accept a (meaningful) permanent loss of capital.

 

On the other hand, I got lucky with Altius, and exited my position before the stock price fell. (I still like Altius business model, and I think they will do fine over time).

 

Cheers,

 

Gio

 

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I didn’t expect Brindle’s sudden departure from Lancashire… I was utterly unprepared and had to accept a (meaningful) permanent loss of capital.

 

On the other hand, I got lucky with Altius, and exited my position before the stock price fell. (I still like Altius business model, and I think they will do fine over time).

 

Cheers,

 

Gio

 

Gio,

 

Why do you think Lancashire is so "Brindle" dependent?  Surely the management team even ex-Brindle is still very good and should do well once the cycle turns??

 

Look forward to your thoughts...

 

cheers

Zorro

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Not recognizing the opportunity and doing enough work on the spin-off by Spectrum Group of A-Mark Precious Metals. The situation was described in more detail in this post on OTCAdventures: http://otcadventures.com/?p=1213

 

I saw it mainly as an opportunity to get cashed out and to receive some value from the A-Mark shares, but the A-Mark spin-off was where the real value was. I sometimes give up too easily when something looks a little complex. Perhaps I could not have figured out A-Mark's value anyway, but I should have spent more time on it.

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Gio,

 

Why do you think Lancashire is so "Brindle" dependent?  Surely the management team even ex-Brindle is still very good and should do well once the cycle turns??

 

Look forward to your thoughts...

 

cheers

Zorro

 

Zorrofan,

 

Probably you are right. I don’t really know… I give lots of weight on past track records, when I decide who I want to partner with, and who I don’t want to. I might be too demanding and too much fixed on this requisite, but I think it is the best recap of the "qualities" of any owner-operator that’s at our disposal.

 

Of course, I don’t require only a great track record, nor I require only to understand well and approve the business strategy going forward… Instead, I always require both.

 

I might still like Lancashire’s strategy and how they keep communicating and implementing it… But imo the track record was Brindle’s… Therefore, 50% of what I require just became missing, when Brindle left the company.

 

And I decided to shift my capital into businesses where I am comfortable both with the past (track record) and with the future (communication and implementation of present business strategy).

 

Gio

 

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Lots of hindsight bias here. If you did not understand something, you did good by not investing. Even if it went up 5x.

 

A thread asking people about their misses for the past year is by definition about hindsight. That's the point.

 

My biggest miss of the past year is probably premature accumulation in a very illiquid OTC microcap. I thought it was very cheap, and it then proceeded to get much cheaper (volatility is pretty crazy, there's almost no float and the bid/ask is often 10%+). I think it's only a temporary loss, with fast-growing IV being much higher than the quoted price, and I'm comfortable holding it for the long-term, but I do wish I had been able to buy more at lower prices before getting to a full position.

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The only stock that I would have done things differently given the information at the time is CLUB (and it's not my biggest loss on the year).

 

I didn't appreciate just how significant a small drop in revenue was given high fixed costs. And that their locations really didn't offer any kind of barrier to entry.

 

I believe losing 50% in this company will be the catalyst to me investing a lot better in the future. I changed how I approach researching and valuing companies after that.  I'm betting losing a lot in that one will be one of the best financial things that will have happened to me.

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I think my biggest multi-year mistake is Tesco. I finally let it go at a 30% loss. But, it has taught me a valuable lesson. Don't buy a stock if you see a business model risk. I made similar mistakes with Best Buy and HP but did not learn my lessons there because I was able to exit them at small profits.

 

The second lesson was the Sberbank investment. I conjectured that Ukraine will be a short term issue and the stock will pay off handsomely in a small time. I feel less comfortable after the drop in oil and the continuing instability in the region. I am still going to keep my Lukoil and CTC Media positions though.

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Not buying enough FCAU aka FIATY.  Made it a 5% position instead of 20% (I tend to be concentrated) back in August when I hoped the price would go still lower (from a 52-week high of ~$12.50).

There were catalysts already, e.g. good Maserati sales, signs of Fiat wanting to spin off Ferrari, etc.

 

I guess GM is another miss.

 

Agree that the oil price collapse is totally from the left field (to me).

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Didn't sell AWLCF at $24 to lock in some profits. Not selling it again when the majority owners sold some shares.

 

I missed the boat on that one also.

 

A while back I read an article about Allen Meacham's position in Sandridge Energy, including an explanation of why they got out of the position.  I wish I had read that before I started a position in EXXI.  My position in EXXI was primarily based on the value of their proven reserves (fairly substantial) in the Gulf of Mexico relative to the EV of the company.  Had I read the article, I probably would have avoided EXXI. 

 

Also burned by a position in RIG.  While I saw the downturn in oil coming, I did not anticipate the severity of the downturn, particularly with respect to rig usage and contract values/lengths.

 

Finally, my biggest blunder of the year.... I sold out of SCO in late-summer  @ ~$28 for a 15% gain.  Because of my employer, I am unable to invest in certain parts of the market, so I tend to be overweight energy pretty much all of the time.  Because of that, I generally try to remain hedged, either through USO/SCO or by shorting an overvalued E&P company.  Anyways, I was hedged with SCO during the Summer months, as WTI and Brent moved through $100/barrel.  I basically added to my SCO position all summer as oil moved higher and higher.  It became a 20% position for me as I was convinced the price of WTI was disconnected from the actual supply-demand for WTI.  Anyways, the position became a bit large for me, so when it finally turned around and hit a 15% gain, I sold.  I was really on the fence about this one, and figured the prudent action was to take it off the table for a reasonable gain. 

 

Hindsight is obviously 20-20, but I must say it is rather painful to see SCO at ~$76 now. 

 

 

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YHOO. I knew the price would track Alibaba as it went closer to public. I stay away from the online stocks generally and have always been apprehensive about anything that isnt best-of-breed. I would still have put money into GOOG over YHOO however this was a real case of the company holding something far more valuable in the form of BABA. Big miss on my part not to participate. I didn't even want BABA shares, if that adds to my thesis being that YHOO was an easy investment 'hack.'

 

Otherwise got blown out of the water on SHLD. Sold out completely, but did well on Lands' End.

 

Tough year, but onward.

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Thanks for starting this. I have a few:

1. An untimely exit out of a 5-year SHLD position that would have been a lot less painful if I had taken the time to do a proper analysis of why I held the stock and recognized earlier that I simply could not assess its value (at least I couldn't).

2. Not being patient enough and moving out of a working STRA position to raise cash without really having to (definition of an easily avoidable unforced error).

3. After studying CKI and concluding that other posters had it right and that it was a buy, procrastinating and not making the transaction.

4. Still being unsure what to do with a few legacy resource positions has to belong in this list : )

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Lots of hindsight bias here. If you did not understand something, you did good by not investing. Even if it went up 5x.

 

A thread asking people about their misses for the past year is by definition about hindsight. That's the point.

 

My biggest miss of the past year is probably premature accumulation in a very illiquid OTC microcap. I thought it was very cheap, and it then proceeded to get much cheaper (volatility is pretty crazy, there's almost no float and the bid/ask is often 10%+). I think it's only a temporary loss, with fast-growing IV being much higher than the quoted price, and I'm comfortable holding it for the long-term, but I do wish I had been able to buy more at lower prices before getting to a full position.

 

Liberty, you said you built a full position, so couldn't you tell us what this microcap is??

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Thanks for starting this. I have a few:

1. An untimely exit out of a 5-year SHLD position that would have been a lot less painful if I had taken the time to do a proper analysis of why I held the stock and recognized earlier that I simply could not assess its value (at least I couldn't).

2. Not being patient enough and moving out of a working STRA position to raise cash without really having to (definition of an easily avoidable unforced error).

3. After studying CKI and concluding that other posters had it right and that it was a buy, procrastinating and not making the transaction.

4. Still being unsure what to do with a few legacy resource positions has to belong in this list : )

 

CKI is one of the quickest buys I made, maybe tied with MKL

 

Mine: Obviously Erbey, but I think ppl know my thoughts there

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I think the topic should be titled mistakes rather than misses.  A mistake implies something that you did wrong and can learn from.  You could have plenty of misses every year and still manage an above average portfolio. 

 

 

Agreed that there's a bit of a definitional challenge here.  When I think about "misses" baseball comes to mind.  So, I think about a swinging strike (the old man calls them "errors of commission").  But let's not forget about all of the times that we've taken pitches rather than swinging (ie, errors of omission). 

 

In 2014, outside of a few special situations, I bought no securities and instead built my cash position.  I came close to buying some securities in October when the market dropped, but real life interfered and I didn't find adequate time to think things through and buy anything.  So, in 2014, I made absolutely no swinging strikes, but I failed to swing at any number of pitches that were grooved.

 

Overall, not a bad year.

 

SJ

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My three are underestimating the duration and extent of the mining downturn, the Greek brinksmanship and the decline in oil prices.  These three manifested themselves in my largest declines this year namely in Emeco, Lukoil and Intralot.  The most permanent miss is the mining downturn and the need for equipment so Emeco is the one I am questioning the most in term of hold vs. sell.  Lukoil at this point is discounted major oil company who is really cheap and I will hold unless I see Putin starting to nationalize assets, which to this point he has not except for assets owned by his political opponents.  Intralot I think is a mislabeled company who has lesser comps (Codere) selling at large premiums to Intralot's valuation and now with an activist shareholder and a new CEO who knows what could happen.

 

Packer 

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