I received an email from a young investor telling me he'd closed out of a common position we both held and had briefly shared research on over the last year.
He wrote to me, on why he sold: "I may be making a mistake down the road, but I could not get over the some of the risks surrounding broker/dealer requirements to keep the stock listed. This was a large position in my account, so the risks seemed magnified."
I am not one to judge. people sell for all kinds of reasons. he seemed like a nice kid who'd done some digging and we shared an interest in offbeat names. And I think he sent the email from a good place; he was sharing, and that's nice.
but i didn't know what to do with the information, and so i was bothered by the email. I still can't put my finger on it. i ended up quibbling with my wife, who'd texted me like 30 seconds later about dinner (that was assuredly not the right response).
a lot has changed with the company in the last year - it de-registered in April and hired a new, young (but experienced) CEO at year end - but nothing that initiates action now.
maybe if it were a reason i'd understood, it would have given me an opportunity to learn, think, review, or discover a new angle on the investment prism. instead, it felt like an affront. I don't know why? i know it wasn't intended that way. i think I didn't know what to do with the information.
i should have just deleted it, but i hastily penned him the response below. he politely and gracefully acknowledged it when he could've told me something else ... but when i reread it, i think it's pretty good advice for kids starting out as investors wall street, so i decided to post it here:
I appreciate that you told me you sold, though it was unnecessary and it has no impact on me.
But I'm writing here very much in reaction to something that's bugging me ...
you write on your SZ profile that you're fans of Mike Burry and Seth Klarman
And that you're a deep value investor
And that you read margin of safety
... And all I got to say is: "talk is cheap."
You've sold a stock you've held for maybe a year for a reason that makes absolutely no sense and based on this information - all the info I've got - you're not only failing on the long term deep value front but you're also not honestly reflecting on what you're doing and why. your reason for selling makes no sense to me.
lookit, I know nothing about you. maybe this is way off base. maybe i'm just a voice in the mist, but you might want to seriously take a long hard look at this experience, figure out for yourself with honest self critique what went wrong, what you can learn from it and how it might effect you going forward.
there's a lot of things we can do with our lives time beyond investing. whatever it is, if it comes from deep inside, from a place of passion and obsession and love, then you're in the right place. and I urge you b/c you're young, take your time and figure out what that is, and do not stop until you get there. it's worth the effort.
seth klarman and mike burry don't give a shit about you. Plus I bet there have been many days when they wish they were someone else. If you're putting them on a pedestal b/c they're rich and successful, then you're doing it for the wrong reason. [And] if they're your heroes b/c they did extra work to make sure they were right and stuck to their guns when everyone else said they were wrong, then you've just failed your test.
that's my best effort to be like "good luck, kid"
... and I meant that, the good luck part, figuring it out and all that.
it takes a lot of practice learning to do anything and investing is no different. but learning means making mistakes. so beginners should start small and take time figuring out their tolerance for pain and risk and then use that as a guide to the questions they need to keep asking.
the way i see it, the more you know, the better you can establish an appropriate price for a stock, understand why it doesn't trade at your price and figure out what it will take to get there:
who are the customers?
why do they pay for it?
what would make them change their behavior?
how does the company make money on this?
and then with more practice and observations, you might start to see patterns emerge where your research leads you places you didn't know, b/c you kept an open mind, and you asked more questions and dug for more research.
or it takes you to a place where you find other people investing in the same things and you are suddenly a victim of confirmation bias: "oh they're doing it, so i feel better." sometimes it's better to seek out people who disagree with you.
finally, there are so many angles to investing. but having a good post mortem is a great tool. keep a collection of your investment decisions (this is mine, here) and then reflect later on what went right and what went wrong. it can be very helpful in scaling the learning curve.
improvement is not automatic and no one is an expert in everything but if you love this, and carve out a place for yourself, and can maintain the intellectual honesty to reflect back on what's going right and wrong, then it just gets back to the theme that underlies this blog: patience.
it's tough - as someone just told me - when you commit capital to an idea that does nothing. capital is the air we breathe and our great passion requires a lot of it. start small, be patient, don't go bust and if investing it lights a fire for you, you'll find endless opportunities to learn.
- END -
THIS IS NOT A SOLICITATION FOR SERVICES OR ADVICE ON BUYING OR SELLING STOCKS. I DON'T KNOW KLARMAN OR BURRY OR THEIR FEELINGS ABOUT YOU. THEY MIGHT ACTUALLY GIVE A SHIT!
- Long Cast Advisers
- Avram Fisher, Founder & Portfolio Manager of Long Cast Advisers, is a former equity analyst at CSFB and BMO covering industrials and business services. He has prior experience in private equity; as a corporate governance analyst; as a writer; reporter and private investigator; and as a lifeguard and busboy (I still clear plates when my kids don't). This blog is an open book of ideas about patient investing and about starting up a small-cap focused RIA. It is part decision-diary, part investment observations and part general musings. Nothing on this blog is a solicitation for business nor a recommendation to buy or sell securities. It is simply a way to organize and share thoughts with an expanding audience of independent, patient and talented small cap investors. www.longcastadvisers.com