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What to do about under performance?


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I think its also important to understand why its under performing. If you feel like you can truly value the company and the market is just not giving it the value justified then I dont see that as a reason to sell. In Grahams words the market is there to serve you not guide you.

 

If a stock is under performing because the business is consistently under performing then that is a clear sign to sell or rethink its value to see if you made a mistake.

 

I have a large portion of my portfolio in PM and it has traded sideways for a couple years due to currency issues. The underlying business is doing great. It has been a slight drag on my portfolio outside of the divs but I believe the currency issues will eventually swing to a tailwind. As a result Im comfortable holding it. If the underlying business fundamental deteriorate then I need to re examine things.

 

Under performance is usually magnified by gross exposure so lightening up a little will make it a less painful. Again if its a stock you believe good enough to hold for 10 years even if the market closed (quoting Buffett again) the under performance could be a market misjudgement that you have to wait out.

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I think its also important to understand why its under performing. If you feel like you can truly value the company and the market is just not giving it the value justified then I dont see that as a reason to sell. In Grahams words the market is there to serve you not guide you.

 

If a stock is under performing because the business is consistently under performing then that is a clear sign to sell or rethink its value to see if you made a mistake.

 

I have a large portion of my portfolio in PM and it has traded sideways for a couple years due to currency issues. The underlying business is doing great. It has been a slight drag on my portfolio outside of the divs but I believe the currency issues will eventually swing to a tailwind. As a result Im comfortable holding it. If the underlying business fundamental deteriorate then I need to re examine things.

 

Under performance is usually magnified by gross exposure so lightening up a little will make it a less painful. Again if its a stock you believe good enough to hold for 10 years even if the market closed (quoting Buffett again) the under performance could be a market misjudgement that you have to wait out.

 

I have averaged down LUK since 2008. My average price is about $22. There has been a few times in the past where it has reach $35 and it has come back down again since then. I am fine with holding it a long time. I guess I should hold on to it and get ready to reduce when it reach mid $35 (around 1.2 BV) probably.

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It depends, to me. I used to own Loews, but ultimately ended up selling it because of a combination of its businesses being lousy and management refusing to do anything ever.

 

It's much easier to hold on to underperforming companies if management is proactively creating value and the underlying business is performing pretty well. Pardee has trailed badly since I bought it, but I continue to hold it because I like most of the moves management makes and the economics of the business have remained pretty attractive despite the weak energy markets.

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I think its also important to understand why its under performing. If you feel like you can truly value the company and the market is just not giving it the value justified then I dont see that as a reason to sell. In Grahams words the market is there to serve you not guide you.

 

If a stock is under performing because the business is consistently under performing then that is a clear sign to sell or rethink its value to see if you made a mistake.

 

I have a large portion of my portfolio in PM and it has traded sideways for a couple years due to currency issues. The underlying business is doing great. It has been a slight drag on my portfolio outside of the divs but I believe the currency issues will eventually swing to a tailwind. As a result Im comfortable holding it. If the underlying business fundamental deteriorate then I need to re examine things.

 

Under performance is usually magnified by gross exposure so lightening up a little will make it a less painful. Again if its a stock you believe good enough to hold for 10 years even if the market closed (quoting Buffett again) the under performance could be a market misjudgement that you have to wait out.

 

I have averaged down LUK since 2008. My average price is about $22. There has been a few times in the past where it has reach $35 and it has come back down again since then. I am fine with holding it a long time. I guess I should hold on to it and get ready to reduce when it reach mid $35 (around 1.2 BV) probably.

 

Has the IV of the company increased since you bought it in 2008?

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