Know What You Own

Andrew Rangeley recently wrote about sharing his investment ideas. The full post can be found at http://yetanothervalueblog.com/2019/07/some-things-and-ideas-july-2019.html. In the post, Andrew wrote “…the longer I invest, the more I think the most important part of this job / doing the work around this job is developing the conviction to hold an investment thesis.” I couldn’t agree more.

When I started investing I would look at what other people were doing and try to back into why they owned what they owned. I still think that’s a useful, and interesting, exercise. However, you must make sure you don’t rely on the conclusion of the person you are researching. Instead, research the idea in order to determine whether that particular asset is right for your portfolio.

The world has many potential outcomes. Unless you know why you own a position how will you know when to sell? Which path of outcomes bothers you and which paths are you OK with? I guess you can follow some famous investor’s SEC filings and sell when they sell. But, if you implement that strategy I would strongly advise against checking stock prices in between filings.

What happens if you follow your favorite blogger/Twitter account into a position? How will you know if they’ve changed their minds? You probably won’t. And they probably won’t think to tell you when they exit. You have to know what you own and why.

A recent example from this blog is Ryanair (RYAAY). I highlighted RYAAY as an interesting investment idea on May 22, 2019. As a quick aside, this is a good time to remind everyone reading this post that nothing here is investment advice. Anything SCG writes about is meant to highlight interesting things to research and/or look into for learning purposes only.

Anyway, the stock traded at ~$68/sh when we wrote about it. A mere 3 months later the stock traded at ~$57/sh. A 17% “loss” in 3 months (aka -68% annualized return). Impeccable market timing! Was I concerned? Not even a little. Would I have been concerned if I followed someone else into the position? Heck yes! SCG probably would have sold.

Furthermore, I worry that someone may have followed us into the position and sold at the wrong time. I implore anyone reading this not to buy anything I write about. If it interests you then please do your own research. Develop your own conviction so you know when to worry and when not to. Otherwise, you’re just donating money to people that did their work.

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