Thread on - "Selling great companies for non Business reasons, and the lessons within". My experiences below with $MSFT, $NFLX, $COST, $NVDA and $LULU.
cc'ing for comments : @TMFJMo @Gautam__Baid @Matt_Cochrane7 @7Innovator @saxena_puru @FromValue @IntrinsicInv @BrianFeroldi
cc'ing for comments : @TMFJMo @Gautam__Baid @Matt_Cochrane7 @7Innovator @saxena_puru @FromValue @IntrinsicInv @BrianFeroldi
Being an individual, long-term investor, my Buy/Sell ratio is usually 5 to 1 (or more), especially since I can buy new positions with existing cash in Portfolio, or incoming cash (instead of selling current positions to buy something else).
Even with that backdrop, I have made some dumb dumb mistakes in selling solid businesses due to (perceived over-) Valuation of the Stock, Market valuation or some other crazy (& invented) reasons.
The $LULU sell (in 2010) and $NVDA sell (in 2014), I can excuse as not having enough experience by then or operating under a slightly different Philosophy until few years ago, but the three sales of $MSFT, $NFLX and $COST in Feb 2017....
...(all within a week or so, mostly as I thought Market has gone too much since 2016 election) has been my worst phase and taught me some very valuable lessons.
1.Yes, there'll be positions you buy purely for undervaluation reasons (with not enough confidence in the long-term story of the business), and it's OK to sell those if the valuation gap has closed, or the expected catalyst is not materializing within a given time frame.
2.And those positions that are proving your thesis wrong (or not strong enough) and it's important to take an objective look at them and sell w/o hoping to be back in the black.
3.For the pos you buy for the LT growth story (that you understand, & thesis is playing out well), don't get shaken out of those so easily for non business related reasons (especially when you're not constrained like most Professional investors are due to their defined charter).
Yes, it's easy to say "Never sell good Co's" after a 11 year bull mkt, but if you're thinking in terms of decades, that is the one main edge for individual investors - holding (& adding to) good biz as long as they're actually getting better & their best days still ahead of them.
Truly exceptional companies do not necessarily follow strict/reasonable valuation ranges on their way to being great.
Each investor have to decide for themselves when to make exceptions and for which exceptional companies, about not selling purely on valuation reasons.
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Each investor have to decide for themselves when to make exceptions and for which exceptional companies, about not selling purely on valuation reasons.
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