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What were your most boneheaded decisions last year?


Rabbitisrich
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Did we do this thread already? Let me know.

 

I missed out on BBEP and FUN at their very lows due to an overweighting of certain negative information.

 

BBEP - I ignored management's history of profitably hedging their cash flow, as well as the value of said assets, which far outstripped the stock price. Instead, I obsessed with management's character and the atrocious corporate governance.

 

FUN - I focused upon their inability to pass inflation, management's history poor capital allocation, and impending miss on the total leverage covenant. I was pretty sure that the lenders would use cash flowing companies like FUN as a means to safely boost yield. I ignored the strength of the underlying business relative to the stock price, and I didn't precisely quantify the likely effect of a covenant miss. I think management is kind of sticking it to the shareholders with the current buyout price however.

 

 

So... fess up. Share your mistakes so that hopefully we will all skip out on them after the next bubble.

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Not adding to my last 5 purchases the 2 weeks I was on vacation in Maui. The last 5 purchases I made in the previous 4 months appreciated on avg. 400% off their March lows, I could have paid for the condo I stayed in with the profits I left on the table. Think BAC, BSC, MSSR, ING,CLS

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Bought General Growth Properties at the bottom of the market, just as they were about to declare bankruptcy (not my own idea, read a Bill Ackman presentation). After they went up three times, I sold up despite still agreeing with Ackman that the company was trading well below instrinsic value. Should have been a 30-bagger >:(

 

Bought Allied Irish Bank at just over €3 in late 2008 on the fact they hadn't been so low in 15 years and were still profitable. Share price continued to tank and ended up reaching a low of something like €0.30. Stupidly didn't do my homework (bank is probably the most insolvent bank in the Western World now). I don't feel too bad because even Warren Buffett got caught out trying to catch a falling knife with the Irish banks.

 

Lost the most money on my Penn Traffic position, but strangely I wouldn't consider this an awful pick. When you're buying the garbage that no one wants, you're always going to get a few zero's.

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Error of commission:

1.  Bought BRK.UN reaching for the distribution yield - got two months worth and then they suspended and the price went in half.  Saving grace - realized the game had changed and sold promptly saving another 50% drop and didn't put too much in it anyway. 

 

Error of omission:

2.  Not trusting my analysis of HTZ.  Great brand, fast reaction by management wrt the downturn, good enough balance sheet at the time.  That was around $2.75 / share.  :-[

 

Congratulations to those whose major errors were ones of omission.  They don't cost anything in $.

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Neglected to buy AXP at $10/sh in March when it was yielding 8%.  Would now be a 4 bagger

Neglected to buy PLD at $2/sh in Nov 2008 when it was yielding 45%.  Would now be a 7 bagger

 

Huge unforced errors or "acts of ommission"

 

AXP was a no-brainer.  I too failed to make a purchase, which is one of the worst specific errors of omission that I made last year.  Even at the time, it was obvious that AXP was ridiculously undervalued but I chose other securities instead.

 

Beyond the specific errors with AXP, WFC, MMM, etc, in retrospect, I made a fairly serious allocation error.  By the end of March when the S&P was 600-700, I was -10% cash, and about 110% equities.  My margin interest rates were only a shade over 2% and dividend rates for a whole host of companies were well over 2%.  With market valuations at that level, the allocation question was really a binary question.  Either the entire world economy goes into the sh*t-hole or it doesn't.  In either case, more leverage would be justified because if the world economy did go into the sh*t-hole and the S&P collapsed (ie: S&P~300-400) having my investment account blow-up would have been the least of my problems....on the other hand, if the market had held steady or recovered (as it did) a bigger dose of leverage would have made a significant difference in my ultimate wealth.  So maybe I should have been cash -50% and equities 150%.

 

SJ

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My most boneheaded move was not selling securities that were priced at 50 or 60% of FV to purchase others available at 20 or 30% of FV.  At the time, I didn't want to sell what I owned because I thought it to be worth so much more than its price at the time.  Meanwhile, if I had sold and purchased lower price/IV securities, I would have had significantly greater returns when the market came back.  My eye was not watching the right ball.  Lesson learned.

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None, other than selling out of WFC at 18-21 after over 100% in gains in the shares and 250% on the options...still don't think that was a mistake, as we were being cautious. 

 

We did very well in 2009 with hardly any errors of ommission or commission.  Our distressed debt portfolio shot the lights out, our equity positions were rock-solid or provided significant gains, and we averaged out of alot of positions as the values rose dramatically so that we have plenty of cash on hand right now.  We're in fantastic shape for 2010!  Cheers!

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There were a couple of fine looking small caps with strong balance sheets that I was looking at and neglected to invest in, which later rose 200-400%. But in the long run I don't see them as very major mistakes, me being a relative beginner and all. My biggest mistake was not liquidating more of my money to put on the market in the winter and spring. I don't even want to think about the opportunity cost of that...

 

I was also looking at buying calls on some major Swedish companies with high debt, but in the end chose not to for some obscure reason.   

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Definitely selling positions wayyy to early. General growth after a 100 percent gain at roughly 3 dollars. Buying freeport at the bottom selling after 30 percent gain. Tata motors getting in at 4 dollars selling at 9 dollars. Also not buying sns at 6 dollars.

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Errors of omission: not buying ACF close to 4$ when Berkowitz was backing it and the book was obviously very well managed: 5 bagger missed.

Errors of commission: buying some LUK too early (in the high 20's). Buying SNS a bit too late (high 9's - low 10's). Not committing enough capital to certain ideas (not enough in WFC at 10 or AXP at 12).

Things went well and I feel good with my current portfolio, but I made some mistakes along the way...

 

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I do not trade too much so it is hard to see my mistakes ( or maybe I don’t have much insight!!)

 

2009 was a very good year for me.

 

I guess avoiding bad decisions in 2009 (like selling everything) was not to panic when everything is going down (I want to thanks everyone on this board for helping to get trough crisis like the fairfax a few years ago and this brutal recession and coming out of it unscathed and stronger)  and taking advantages of the fire sales of some stock (why buy AXP at $53 in 2006 and not  $12 this year).

 

Of course I could have bought more of this stock or this one, but there were so many opportunities, and it is a very easy task to take great decisions in retrospect (much harder looking into an uncertain future!!).

 

 

Thanks

 

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One lesson was I was too cautious in the size of my buys. I did get WFC, GE and AMEX near their lows; I just did not get aggressive enough with how much I bought. I also should have increased my weighting in equities (likely closer to 70 or 80%). Especially once it became clear that FFH had switched gears and were loading up on equities. And I did sell stuff too early.

 

Having said all that I am very happy with my returns last year (30%) the previous year (17%) the previous year (47%) etc etc, . I am very cautious.

 

My focus now is what to do going forward...

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Oh, actually forgot my stupidest mistake of them all, bar none. I bought a shipping company just because it was selling for about half book. Buffett would have laughed himself to death. Didn't lose much on it in real money, but major opportunity cost and even more major embarrassment when they started burning money like there was no tomorrow. Buffett would have laughed at me for a month.

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No serious errors last year. Should have bought more SNS than I did. Have cash and looking for good entry points in the next several months. I think one can make some serious money in the next several years and hope to capitalize on opportunities.

 

 

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My biggest mistake is the fact that I didn't buy nearly enough stocks in march (did any of us? NO!)... Looking back, I wish that I would have sold every possession that I owned, including my home, bought more stocks, moved to the beach, and been a hobo for a few months. I would have been a wealthy homeless man. (and would have bought a nicer house than I have now, at a better price!) ;)

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Only one boneheaded mistake.  The marketable holdings were up by the end of 2009 almost three times the portfolio value EOY 2008.  But a very large illiquid derivative we held was up only about 50% , mark to model.  All of the big mistakes were made in 2008 when we were down about 36%.  

 

We took some quick profits from some bottom fishing in Nov 08 and had some cash available when the market hit bottom in March 09.  How did we know that was the bottom?  Well, we didn't know this in an absolute sense, but if early March wasn't going to be the bottom, the continuing decline would have been worse than the extent of the great crash of 1929.  That looked like good odds.  Unlike the situation after the 1929 crash, which was followed by an even worse drop, The Fed was throwing $$ at the system as if the greenback were play money.  That also looked like good odds.  When the market challenged the limits of the 1929 decline in early March, we jumped in with both feet, using our cash and selling high quality issues that were only down moderately to buy companies down about 90% that looked like survivors.  We also bought preferreds and other issues that were yielding 20% or so.  The only boneheaded decision was loading up on BankAmerica at the bottom instead of WFC because WFC, although much higher quality, seemed to not have quite as much upside.  We had a lot of short term losses from 08 as tax offsets, so we sold these lower quality issues in early summer and moved back into FFH and our favorite Bermuda Re's as well as getting back in BRK at the end of 09.  

 

Lest this account seem too wonderful, I did some absolutely stupid things in 2008.  The question concerns 2009, but I'll relate details about the poor judgement I used in 08 to provide balance if anyone's interested.

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