Author Topic: Investing Lessons/"Mistakes" from 2020?  (Read 19284 times)

drzola

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Re: Investing Regrets from 2020?
« Reply #10 on: February 15, 2021, 10:51:32 AM »
Did not purchase and sunk into lovely Ab and Sk Ugh!


valueinvestor

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Re: Investing Regrets from 2020?
« Reply #11 on: February 15, 2021, 10:55:29 AM »
Noooo! Damn. Just felt the pain reading that.

valueinvestor

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Re: Investing Regrets from 2020?
« Reply #12 on: February 15, 2021, 11:32:10 AM »
Do you think there is anything about your process that you would have changed?

In general, I caution against drawing too many strong conclusions about your investment process during this particular market swing because I think it made a lot of people look silly and some of those people wouldn't look silly in an alternative version of events, whereas some of my decisions to hold on might look smart now but could have been disastrous. 


Funny enough I've touched upon these scenarios, albeit facetiously in my prior posts. I think my investment process was the same, as mentioned it was diluted, because I was not myself. Hence, I wrote the post because not many talk about the importance of health and mental clarity.

As for the edge, again thinking longer than 1.5 years, as this iirc is the average holding period for an equity, as well as thinking about margin/cash-flow profiles ten years out helps. There were alternative scenarios where my investments would've looked disastrous but at the end of the day, if it was that bad - then every equity investment imho would've been disastrous, other than shorts/puts.

valueinvestor

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Re: Investing Regrets from 2020?
« Reply #13 on: February 15, 2021, 11:32:38 AM »
Sold a position in BYDDY bought at $5 because in April 2020 the outlook for EV and their other businesses seemed to be negative.  Partly driven by wanting to raise cash.

Lesson is to not raise cash during a pandemic? I think it could've worked out for you, if it dipped again.

valueinvestor

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Re: Investing Regrets from 2020?
« Reply #14 on: February 15, 2021, 11:52:56 AM »
Honestly, if the 2020 episode worked out like 2008/2009, you would not be having these regrets.

It would've worked just fine imho. None of these companies mentioned with the exception of Wayfair required dilution to grow. Amazon worked out fine in 2008.

It's something that I've touched upon in prior posts, but not in depth where I entertained the possibility of being 2008. If it was greater than 2008, then we would've been screwed 10x and no investment (even cash) would've been safe except shorts - in that scenario.

Again I think as investors, we should optimize and get the most incredible bargains. We may not get it, but perfection is a race where there's no finish line. The purpose of this thread is to talk about how we can have done better, and I feel as such health is one of those important factors.

As for not knowing the world back then - you didn't really need to know. There were companies that were going to do fine through the pandemic, I didn't expect them to go 200-1000% in less than a year, but that's how it turned out. 

As for companies such as Berry, and Dupont, there are technology suppliers to those companies that you know will grow tremendously well with greater upside potential. I think many are missing the fact that technology is not a novelty, but rather a increasingly important infrastructure asset to compete. Without cloud computing, I don't think some of these companies can survive.

The stuff that I regret is not buying more Ashtead.  I regret not buying more Berry Global and DuPont at the low.  Because I know those companies.  They were existing portfolio companies that I knew were going to be 3-4x in 3-4 years.  No balance sheet issues, good cashflow, etc. But I decided to diversify into a bit of growth.

I don't think that's a mistake, if you're managing client money. Especially if your world view is that it can get worse, I think it was admirable that you did your best to protect your client's interest. Not many do. I've met managers who would blow their fund up with risky positions because they can get bailed out by the government or family, and start afresh.

Was there anything else that prevented you from purchasing Ashtead?
« Last Edit: February 15, 2021, 12:25:33 PM by valueinvestor »

valueinvestor

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Re: Investing Regrets from 2020?
« Reply #15 on: February 15, 2021, 11:59:26 AM »
Also to keep the thread organized - if willing, I would like to see:

1. What Happened?
2. Why it Happened?
3. How to rectify it in the future.

I mostly write these posts for myself, as I feel writing is an important aspect of clearing the mind of noise and solidify your thesis, while reinforcing good lessons and removing bad habits.

Here's your chance to do the same?  ;D
« Last Edit: February 15, 2021, 12:01:55 PM by valueinvestor »

Viking

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Re: Investing Regrets from 2020?
« Reply #16 on: February 15, 2021, 02:43:32 PM »
Valueinvestor, i know this is a play on words but i think regrets is too strong (and negative) a word to use when evaluating ones investment process over time. I think of it more in terms of ‘lessons’. That then lead to tweaks to ones investment process.

I love Buffett’s baseball analogy... about how investors are like baseball players... waiting for the perfect pitch... except there is no three strike rule. In this context not swinging at a fat pitch right down the middle is not a mistake. Because another will be coming, and likely quickly. Preparation and patience is key.

The reason i refuse to think in terms of ‘mistakes’ is so i do not develop a negative mindset. That then starts to pollute my investing mental model. My goal is simply to be ready for the next fat pitch right down the middle (which can present itself at any time). And be in a good place mentally to be able to properly capitalize.

This is not meant as a criticism of your post or what you are doing. Everyone is wired differently and they needs to find an investing process that fits their intellect and more importantly their emotional makeup.
———————

1.) what happened? All insurance stocks sold off and got ridiculously cheap in May.
2.) why it happened? Unknown covid losses was likely big driver. Even though it was pretty clear losses in US would not be catastrophic (UK was where the big problem was because of policy wording).
3.) what did i do? Bought a small amount of WRB and CB and sold for nice, quick single digit gain
4.) rectify in future? Less thumb sucking. Be more aggressive (larger position size; hold for longer).
5.) Apply lesson learned: When Fairfax (again) got wickedly cheap in late October i took advantage and bought a decent sized position. And got very aggressive with position size once vaccine news came out mid November. Still hold very large position (as the news just keeps getting better).
« Last Edit: February 15, 2021, 02:47:15 PM by Viking »

valueinvestor

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Re: Investing Lessons/"Mistakes" from 2020?
« Reply #17 on: February 15, 2021, 03:32:16 PM »
This. You're right - many don't understand the implication that language and wording can have on a person's mind.

It lends perspective. Hence I've changed the title --- as suggested in the original post - it's not really about regret, nor mistakes, but rather what we can do to improve next time.

Fairfax has been firing on all cylinders for a while, and we're probably going to see a golden era for them soon, if not already.

Thumb sucking is one that I learned in 2008. Rectified by Bezos with the following passage:

“Most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.”


cherzeca

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Re: Investing Lessons/"Mistakes" from 2020?
« Reply #18 on: February 15, 2021, 03:43:35 PM »
I have a principle, buy on dip.
what is a dip? and how much?
a dip depends on the atmospherics...is there a big reason for dip that scares me? (then dont buy), or a sensible reason for dip that seems to be a normal part of the variability of the market (buy)
how much?....cf sizing. nothing dramatic.

ok, now how does regret fit into this scenario when I have a principle for action? ONLY when I dont follow my self-imposed rule. 

regret does NOT enter into equation when I am wrong in assessing the situation (eg the dip atmospherics were not that bad and I overestimated the downside), because I accept the fact that I can be wrong.

regret only enters into equation when the set up fits my principle and I dont act.  if I dont follow my principle, what am I doing thinking through what my principle should be?

then I try like hell to forget about it because regret is a terrible emotion to have...it rots the brain.

comes a time to create a new principle...but that is another thread

DocSnowball

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Re: Investing Regrets from 2020?
« Reply #19 on: February 15, 2021, 03:47:06 PM »
Also to keep the thread organized - if willing, I would like to see:

1. What Happened?
2. Why it Happened?
3. How to rectify it in the future.

I mostly write these posts for myself, as I feel writing is an important aspect of clearing the mind of noise and solidify your thesis, while reinforcing good lessons and removing bad habits.

Here's your chance to do the same?  ;D

One straightforward mistake that I made in 2020 was tactical, on the personal finance front - while I was re-allocating capital during the drawdown in March, I simply made selection changes in my kids 529 accounts to move them from cash to US equity, and after two such moves was told I was not allowed any more changes for 2020.  Looking back, I missed out on pouring in the maximum allowed new annual contribution of $70,000 in each child's accounts simply because I took at face value what I was told on the phone and didn't think about pouring new money in. It would have made a world of difference to put more money in these tax-free Roth IRA like accounts with 10-15 year runways.

Another on specific company selection was missing out to emerging platform companies in my field of healthcare - not realizing how Teladoc is on its way to becoming one of the premier platform companies in telemedicine during the pandemic, while knowing well what it had done during the hurricanes in Texas and Puerto Rico. Why it happened - because I didn't think about long term effects of COVID-19, just focused on market timing in March and then held back when markets started going back up. Lesson learned - now I am looking closely at edu-tech companies on their way to becoming the platforms in higher education, TwoU being one of them that I hold - Coursera is another but is not publicly traded yet. Missing out on investing in Google at $1000-1200 was another hare-brained mistake, despite seeing how much of a moat Google was building in the classrooms from elementary education to graduate students.

The big picture lesson learned was that it is very difficult to think rationally on a consistent basis in the middle of a storm, there are so many things going on in life. There is a lot of value in thinking of how to make portfolio level changes well ahead of the year that lies ahead. This inspired me to take a course on Investment philosophies in Fall 2020 and reorganize my portfolio. I have also realized that the international financial system is inherently unstable, and hopefully this means more opportunities lie ahead for the brave and well prepared.