The demise of a value investor

[John Hjorth]

I have no understanding of the strategy implemented here by 17M. I can't relate to it.

 

But I can relate to position sizing. Position sizing - to me - is not only about cash vs MTM values of positions measured against investment ideas at a certain point in time, to me it's also about cash vs capital already allocated to a certain investment idea [down a lot or not, or the opposite], measured as an absolute cap, measured in percent.

 

For every idea, to which I commit capital, while taking the initial investment, I also put on a cap [in percent] of total portfolio, to which is the max the position is to grow [,or to what I'm going to loose, if I'm totally dead wrong], based on my conviction on the idea. I may reconsider along the way on positions, but the tresholds met both downwards [max capital allocation] and upwards forces me to actually think about it.

 

That way of doing things makes me avoid blowing up totally. I may mess up my pants, but I walk away with messed up pants, nothing more. I don't blow up, by continuing allocating further capital to my "best idea" actually beeing my worst, like shoveling capital into a black hole.

 

The last part of the last 17M Blog entry seems to me like the last moves in a Chess game of a looser, ref. above.

[mcliu]

What was his performance? Was it that dire? Market really isn't off by that much from its highs..  ???

[marazul]

Can someone post the copy of the text, the blog is protected. Thanks in advance.

[plato1976]

Market is not off from the top by too much, but most energy was slaughtered. I guess that's why cardboard feels esp bad

[thefatbaboon]

I feel bad for this guy and have no interest in kicking him at all. For what it's worth, I think he made a mistake valuing midstream assets. Very simply one needed to make a quick valuation using simple Ev/ebitda ratios and then check history where these assets can trade. I'm no expert on this area at all but I can find many historical transactions occurring between 8 and 10 times. I don't know why therefore anyone would be so surprised to see valuations come into these zones. Having now finally arrived into historical cheap zones my guess is that he is making a mistake to sell. 

[Ballinvarosig Investors]

You can still get access to his blog through Google cache, if you so wish. I do feel bad for him though. Energy investors have been hit by a perfect storm. However, it does seem to me that investors in that sector have been drinking the Kool-Aid for too long. It seems there was a perception that energy costs could only ever go up, and that led to a heck of a lot of speculation in the market.

 

What I find remarkable is how Buffett seems to have foreseen this trainwreck.