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You know what to do, but you have to wait and wait...


Liberty
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(warning: I'm not 100% sure what I want to say in this post, except to share this frustration)

 

So I know what my next big move is going to be, I want to put a substantial fraction of my capital in something.. But before I can do that I have to wait for something else to happen, and it's frustrating..

 

Once I own something, I have almost endless patience. It could drop by 50% and if I feel my analysis is still valid, I'll hold it and probably buy more, no problem. I buy things that I know I could own for years, that's my style.

 

But when I want to buy something new, I tend to have less patience, and get afraid that it'll go up a lot and that I'll have missed my chance. It makes me want to compromise on my plan (ie. sell something else a bit more cheaply than I should to buy this new thing). I know I should just be patient and wait for the juiciest, fattest pitch rather than just a nice fat pitch, and I know that even if I was to miss this opportunity, I'd do just fine with what I own right now over the long-term, but it's still hard, and I really don't want to miss this one.

 

So anyway, I just wanted to share the frustration and maybe see if others here have the same kind of unbalance patience capacity (no problem with some situations, harder in others)...

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totally with you on that.  You could start averaging in--I usually go with this if I want to establish a large position and I know that the investment will be good (but perhaps not heroic) at current levels.  That way, if it goes up out of range, you have a small portion of the thing you liked, and if it goes down, you average down.  I did this with WFC/BRK over the last 1.5 years (stopped after the August lows).

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totally with you on that.  You could start averaging in--I usually go with this if I want to establish a large position and I know that the investment will be good (but perhaps not heroic) at current levels.  That way, if it goes up out of range, you have a small portion of the thing you liked, and if it goes down, you average down.  I did this with WFC/BRK over the last 1.5 years (stopped after the August lows).

 

I would do that if I was in the situation you describe. My problem is that I don't have enough cash to take the big position that I want to take, so I need to sell something else, but everything I have is too far below IV for me to comfortably sell. So either I wait for something to go up a bit and hope that want I want to buy remains low, or I compromise and sell right now (too low) to make sure I don't miss this new opportunity.

 

I know I should wait, but it's a bit stressful..

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(warning: I'm not 100% sure what I want to say in this post, except to share this frustration)

 

So I know what my next big move is going to be, I want to put a substantial fraction of my capital in something.. But before I can do that I have to wait for something else to happen, and it's frustrating..

 

Once I own something, I have almost endless patience. It could drop by 50% and if I feel my analysis is still valid, I'll hold it and probably buy more, no problem. I buy things that I know I could own for years, that's my style.

 

But when I want to buy something new, I tend to have less patience, and get afraid that it'll go up a lot and that I'll have missed my chance. It makes me want to compromise on my plan (ie. sell something else a bit more cheaply than I should to buy this new thing). I know I should just be patient and wait for the juiciest, fattest pitch rather than just a nice fat pitch, and I know that even if I was to miss this opportunity, I'd do just fine with what I own right now over the long-term, but it's still hard, and I really don't want to miss this one.

 

So anyway, I just wanted to share the frustration and maybe see if others here have the same kind of unbalance patience capacity (no problem with some situations, harder in others)...

 

Liberty, you just realized you're actually human!  ;D 

 

Fight that feeling of wanting to buy something for the sake of buying.  Think about what it was like to buy WFC at $9, BAC at $5, FFH at $80 or SNS at $4.  Buy at points of significant pessimism...do you think the markets are feeling that presently?  Cheers!

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On a related note, just out of curiosity:

 

If you don't have enough cash to make a sizable position in any new opportunities and you don't want to sell any current holdings, do you just stop looking for stocks and stop doing research for a while until you are able to take advantage of opportunities again?

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Don't get too greedy. If it's a good deal at 6, it's a likely a good deal at 7.

After all, when WFC hits 9 bucks, u may be too scared to buy and then it runs to 11, and u said "damn, I missed 9 and never go in"... only to see it trading at 30 later.

 

That's what I'm telling myself. Even if it goes up a bit, if what I sell goes up even more, it'll be a great deal and I'll end up with about as much of what I want + more left of what I'd be selling.

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Liberty,

 

The way that I figure out where I should be is to pretend that my portfolio is 100% cash and think through what I would buy if I were building a portfolio from scratch today.  If you go through that process and discover the new investment doesn't get a significant chunk of the allocation, then you're right to wait it out.  If you find you would put 10,20,30% into that single idea, then at least you know where you ought to be.  You can start to take the steps to adjust your portfolio accordingly.  Maybe sell things that you don't think will perform better than your new idea, or wait for a better price, or wait until you've put away more cash through savings/dividends/etc.

 

I recently went through this same exercise and decided to sell my MSFT position.  Tough sell because it's been a great performer, but I can't expect it to keep pace with other investment ideas over the next 5 years.

 

Regarding selling below IV, there's no shame in selling a good investment if it allows you to buy a great one.

 

Lastly, I have the same problem when it comes to purchase impatience.  I rarely hold out for price.  My rationale is that if an idea is worth buying then it should be cheaper today than it will be tomorrow.

 

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On a related note, just out of curiosity:

 

If you don't have enough cash to make a sizable position in any new opportunities and you don't want to sell any current holdings, do you just stop looking for stocks and stop doing research for a while until you are able to take advantage of opportunities again?

 

Always keep looking. Always keep adding to your watchlists. If you come across an investment that has a 99% chance of doubling, you'll probably find something to sell.

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On a related note, just out of curiosity:

 

If you don't have enough cash to make a sizable position in any new opportunities and you don't want to sell any current holdings, do you just stop looking for stocks and stop doing research for a while until you are able to take advantage of opportunities again?

 

As of late, I've been taking the time to catch up on a lot of investment reading (e.g., various investment books, finishing reading old Buffett/Marks/Watsa/LUK letters, etc.).  That doesn't stop me from doing some poking around though.

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Liberty,

 

The way that I figure out where I should be is to pretend that my portfolio is 100% cash and think through what I would buy if I were building a portfolio from scratch today.  If you go through that process and discover the new investment doesn't get a significant chunk of the allocation, then you're right to wait it out.  If you find you would put 10,20,30% into that single idea, then at least you know where you ought to be.  You can start to take the steps to adjust your portfolio accordingly.  Maybe sell things that you don't think will perform better than your new idea, or wait for a better price, or wait until you've put away more cash through savings/dividends/etc.

 

I recently went through this same exercise and decided to sell my MSFT position.  Tough sell because it's been a great performer, but I can't expect it to keep pace with other investment ideas over the next 5 years.

 

Regarding selling below IV, there's no shame in selling a good investment if it allows you to buy a great one.

 

Lastly, I have the same problem when it comes to purchase impatience.  I rarely hold out for price.  My rationale is that if an idea is worth buying then it should be cheaper today than it will be tomorrow.

 

That's pretty much how I look at things. The problem here, is that it's a choice between two great investments. I would put about 25% in this new one, but the one I would have to sell part of to do that I also love, so I'd a least want to sell it relatively high. I run a very concentrated portfolio and if I own something it means I really really like it, so that makes it hard to sell even if for something I also love.

 

It's not a terrible problem to have because even if I missed this new one, I know I'd do just fine holding what I own now, but it's still this part of the investing process that I find most stressful...

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Liberty, wouldn’t this be the answer to your question?

 

During the next period of time, do you think the position you want to take will increase in value more than one of, or several of your present holdings? If you think that it will, sell and buy, if not, hold and wait. Of course a crystal ball would help :)

 

However, all too often I rush into something because I am afraid it will go up in price. And there seems to be some sort of rule that whatever I buy immediately drop by 10%.

 

Also didn't someone say "Never fall in love with a stock"?

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During the next period of time, do you think the position you want to take will increase in value more than one of, or several of your present holdings? If you think that it will, sell and buy, if not, hold and wait. Of course a crystal ball would help :)

 

I wouldn't be ready to put that much into it if I didn't think it didn't have a good chance of doing as well if not better than what I currently hold. But my worries are more about optimizing the allocation; if I can sell higher yet still buy low, it would be the best of both worlds...

 

Also didn't someone say "Never fall in love with a stock"?

 

Indeed, and I'm ready to change my mind very quickly if the story changes. But as long as it meets all my criteria for a long-term holding (the only kind I have now), I want it!

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I think this is the case that "it is better the devil you know instead of the one you don t"

 

So, I think you only sell some of the ones you know + have  for something else if investment i. is a better quality business ii. has a better margin of safety (cheaper)  and I think iii. you know it as well as you know the one you have.

 

Liberty-have you always been really concentrated? I am trying to be more focused and am trying to use the above in reverse- selling what I don t know as well for better quality + better MOS.

 

Other thought I had was changing your holding perhaps  if one holding would hedge the other (having read book on M Keynes as an investor- that is something he did)

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(warning: I'm not 100% sure what I want to say in this post, except to share this frustration)

 

So I know what my next big move is going to be, I want to put a substantial fraction of my capital in something.. But before I can do that I have to wait for something else to happen, and it's frustrating..

 

Once I own something, I have almost endless patience. It could drop by 50% and if I feel my analysis is still valid, I'll hold it and probably buy more, no problem. I buy things that I know I could own for years, that's my style.

 

But when I want to buy something new, I tend to have less patience, and get afraid that it'll go up a lot and that I'll have missed my chance. It makes me want to compromise on my plan (ie. sell something else a bit more cheaply than I should to buy this new thing). I know I should just be patient and wait for the juiciest, fattest pitch rather than just a nice fat pitch, and I know that even if I was to miss this opportunity, I'd do just fine with what I own right now over the long-term, but it's still hard, and I really don't want to miss this one.

 

So anyway, I just wanted to share the frustration and maybe see if others here have the same kind of unbalance patience capacity (no problem with some situations, harder in others)...

 

I share with you much of the same frustration. Along similar lines

 

1. Selling something at 50% of IV to buy something at 30% of IV is something I find very very hard to do. I get it but find it very very hard to actually do. This is my main mistake I made during the 2008-2009 crisis, I did not sell off BRK to buy others that are much cheaper.

 

2. I am still ambivalent towards setting a too firm line in the sand for purchase price. I had been burned on both sides of this issue so I am approaching it on a more gradual basis buying a little bit above my target price.

 

Vinod

 

 

 

 

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I think this is the case that "it is better the devil you know instead of the one you don t"

 

So, I think you only sell some of the ones you know + have  for something else if investment i. is a better quality business ii. has a better margin of safety (cheaper)  and I think iii. you know it as well as you know the one you have.

 

I agree with all those points, and that's almost the situation I'm in (new thing isn't necessarily better quality, but at least equal to something that I think is very high quality. but it's def cheaper). If the current holding I have was selling for 15-20% higher, I'd sell half of it and buy this new thing. I just have a really hard time selling for the current price, and so I wait, and I stress out..

 

Liberty-have you always been really concentrated? I am trying to be more focused and am trying to use the above in reverse- selling what I don t know as well for better quality + better MOS.

 

I think the max number of companies that I've been invested in at one time was 8-9, and I'm currently in 3, wanting to go to 4 by selling half of one and investing that in #4. My concentration style is very early Buffett-personal-portfolio/Munger, and I think over time it'll probably stabilize around 4-5 different businesses. I don't feel I need to put money in my 10th best idea or whatever, I'd just rather buy more of my first or second best.

 

Other thought I had was changing your holding perhaps  if one holding would hedge the other (having read book on M Keynes as an investor- that is something he did)

 

What book is that? Is it the PDF that was linked in the recent WSJ article, or is there an actual book about JMK as an investor? thx. I liked that WSJ article. What it described is similar to my style.

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Liberty, tell us what that holding is - that will help us better answering your questions.

 

;D

 

AT least I tried.

 

I might post about it at some point, but sometimes I feel like Mr. Market himself reads this board, and if I post about my portfolio, everything's going to drop 20% in a day  :P

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Next time, PM me right after you buy, I will go short 2x the amount you bot, we can split the profit.

 

Hope it's not SD, it's going down day after day.

 

Ha! Maybe you've just found the goose with the golden eggs  ;)

 

And no, it's not SD.

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FTP?  :'(

 

No seriously, I know what you mean and it is stressful in a way. I think that you should always wait until it's obvious. For me it was easy to sell my big BRK position and buy BAC, C, ... this summer and fall. It's a lot harder when the difference is smaller. Patience, wait for the fat pitch! 

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