Gregmal Posted March 30, 2017 Share Posted March 30, 2017 After reading through a few threads, particularly the SHLD and VRX ones, it got me thinking. Obviously we all take major beatings from time to time, the trick is to managing the impact of such events. This is something that wasn't really done with Ackman's VRX investment, or Berkowitz's SHLD position. The effects for both guys have been pretty devastating by any measure, but especially in terms of publicity. I can think of major positions blowing up for many guys. Watsa, Cooperman w/ SD, Pabrai ZINC, Baker Street, etc. But what about guys who haven't really had this problem? What sort of investing style have they used to avoid these pitfalls. How do they manage their positions. Obviously a major market downturn is going to have a predictable effect on performance, but the big killer is having prominent positions go bust for reasons specific to the investment rather than the broader market. First name that kind of pops out for me is Tepper. He does seem like more of a trader, but he isn't afraid to be concentrated in a big idea. What managers do people follow whom don't seem to get beat big? Lastly, more so out of curiosity in regards to others here, how do you personally look to avoid this. Diversification seems to help, but one look at Cooperman the last few years will show it doesn't spare you entirely. As a trader, it seems obviously a bit easier as you typically have a set of rules. But as a value investor, what rules do people use to avoid major blow ups? Do you just size it and let it ride? Do you only add under "x" scenario? Personally I've found avoiding companies with high debt loads/complicated capital structures and unpredictable earnings/consistent history of losses helps. I tend to concentrate in companies with hard assets. The downside is I miss out on a lot of tech, biotech, and even energy names. Apologize in advance if this thread has already been covered somewhere. Still somewhat new here but thought it was an interesting subject given the popularity of threads relating to SHLD, VRX, and FNMA which could be another big blow up for many managers(not surprisingly both Ackman and Berkowitz as well). Link to comment Share on other sites More sharing options...
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