Anyone consider themselves a cigar butt investor any more?

[coc]

16 minutes ago, ValueArb said:

 

I started off living off a small portfolio, and as it grew so did my spending (bought an expensive house, had two kids, one who required expensive therapy when young). In 2007 I knew the housing market was set to crash but didn't have any way to short it and loved my house too much to sell. So instead I levered up (with 15 year mortgages) to take my equity out and put it into the stock market, not thinking it would crash along with real estate. So when my portfolio was down 50% at one point in 2008 I was in a ton of illiquid stocks with big spreads being forced to liquidate at well below IV to cover my monthly burn. I had no idea how long it would take to turn around and afraid I'd burn through all of it in a few years so I went back to work.

 

My goal was always five positions, but always ended up around 10 because the best ideas are reallly illiquid, you can't always get as much as you want at good prices, and can't always get out as quickly as you like when the get close to IV. So I'd usually have 3-4 favorites that i would grow as I slowly got out of others.

 

Thanks so much for sharing - very interesting strategy (and history!). 

 

Before I let you go, how did the portfolio down 50% end up recovering in the end?

[ValueArb]

1 hour ago, coc said:

 

Thanks so much for sharing - very interesting strategy (and history!). 

 

Before I let you go, how did the portfolio down 50% end up recovering in the end?

 

I'm not sure. To be honest after being out of the work force for 7 years I just put myself 100% into getting back into work as a developer. I do know it generated a good deal of income for me over the next few years from passive positions paying out distributions and being merged away.  I was shell shocked from getting myself overleveraged and stopped tracking returns or doing any real investment research because I didn't want the distraction.

 

I have painful memories of telling co-workers Apple was a buy at a 10 PE and so was Facebook after it fell out of favor right after its IPO but kept my account was in berkshire or index funds and didn't take my own advice

[coc]

2 hours ago, ValueArb said:

 

I'm not sure. To be honest after being out of the work force for 7 years I just put myself 100% into getting back into work as a developer. I do know it generated a good deal of income for me over the next few years from passive positions paying out distributions and being merged away.  I was shell shocked from getting myself overleveraged and stopped tracking returns or doing any real investment research because I didn't want the distraction.

 

I have painful memories of telling co-workers Apple was a buy at a 10 PE and so was Facebook after it fell out of favor right after its IPO but kept my account was in berkshire or index funds and didn't take my own advice

 

Interesting. I ask not to dredge up painful memories - just wondering that if the big drop was an indication that you'd been taking more risk than you thought in the Up Years - or simply a bump in the road. Sounds like the latter. Thanks again for the openness.

[SharperDingaan]

Every cigar butt is different, there is no 'formula'.

 

Bought a whack of Blackberry yesterday at a ridiculous price; which, according to the market .... is utter dogsh1te 

All that you really had to do, was realize that as soon as the convertible sold; most of the face value would immediately be shorted against the common .... poor sentiment, and the sudden rush of selling would do the rest. Blackberry isn't going under tomorrow - if it's at CAD 6 by Feb next year, we're up 50%+. Then add in that a lot of people will make a great deal of money if the proposed split happens ... and our catalyst is greed.

 

To quote some iconic phrases from 'Wall Street' .... Greed is good! Greed works! 

Better than the standard cigar butt formula.

 

SD

Edited January 26 by SharperDingaan

[sleepydragon]

Yeah, I consider myself a cigarbutt investor now after recently betting on certain merger arb deal

 

[SharperDingaan]

3 hours ago, sleepydragon said:

Yeah, I consider myself a cigarbutt investor now after recently betting on certain merger arb deal

 

When you could get BB at its lowest price in 21 years, we're pretty sure it is a cigar butt!

Just not the 'traditional' kind. 

 

SD