Thread by @anandchokkavelu

The story of the most money I ever lost on a stock.

(1/8)

As part of the Great Financial Crisis bailouts, many of the banks gave the government warrants to share in the upside of the bailouts.

In this case, think of warrants as 10-year call options.

The government turned around and sold those warrants to the public.

2/8

Having covered the space, banking was theoretically the sector I knew the best at the time.

And I was an enthusiastic buyer of many bank warrants.

Some did well but any market-beaters were wiped out by this move...

3/8

$C was arguably the worst-run large bank that didn't go under.

And its warrants were priced accordingly, with tremendous multi-bagger upside if it were to fully recover and get some market love (think P/B ratio of ~2).

But a total loss if it only did alright.

4/8

So, of course, this is the one I gravitated to.

By "gravitated to," I mean continue to pour money into for years, even in the months before they expired (Jan 2019)...at the time they were trading for less than a penny (!!!).

5/8

Over the better part of a decade, I ended up with more money in that sinkhole than I'd allocate to my highest-conviction stocks today.

The end result is a loss that rounds to 100%.

And what still ranks as my largest loss on any stock.

6/8

The funny thing is I still like the thinking behind that original buy thesis.

I liked management at the time, and I still believe there was asymmetric upside that was worth the risk.

Here's how I messed it up...

7/8

My mistakes on $C warrants:
1) Position sizing...repeatedly adding to a loser, even as Citi failed stress tests
2) Not adding to the winners
3) A 5+ year long-term play became a short-term options play with new $$$
4) Gambling with hope instead of investing with patience

8/8