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Forum List » Guru News and Commentaries Guru News, Stock picks and commentaries  
Righting the ship
Posted by: Chandan Dubey
(IP Logged)
Date: March 18, 2012 10:38AM
One of the biggest and most costly mistakes I made during my investing life was investing in Credit Suisse Group (CS). Here is a bit on my investment summary on this stock.
Meanwhile, I started looking at my investments in more detail. Researching stocks, buying only when the stock offered a margin of safety and passing on things I could not value. I also kept reading books, blogs, stock pitches and reading/listening to the famous investors. Some of the quotes which deeply affected me were Quote: I more or less made all the investing mistakes one can make in a very short period of time (they are covered here in detail: 2009, 2010, 2011). Thankfully, I did not lose a lot of money, which is my only consolation. And I am trying to do what Charlie Munger said some time back Quote: Trying to right the ship Quote: When the market tanked in July-Oct 2011, I was sorely under-prepared. I was worse than all in. I had used the cheap financing by Interactive Brokers and was on margin of SFr 6,000 on a portfolio of size SFr 50,000. My portfolio lost 50% of the value and was standing at SFr 25,000 at one point and I could not get any new money into the market when stocks were selling so cheap. My largest holdings from the time I was stupider were Bank Of America ($6000@$12.5/share - bought on expert speak), HPQ ($5000@$40/share - bought being a contrarian after Hurd fiasco), and BBY ($4000@$30/share - bought being a contrarian after finding it cheap on DCF valuation, ignoring the problems with the business). All these were down more than 50% at one point (except BBY which was down 30%). Owning these stocks as a large percentage of portfolio already, I in good sense did not want to buy more because of the risk. This decision was also helped by the fact that I was in debt/margin. I used my saving during this time to repay the debt but by that time the market had already recovered and I missed the chance of owning Novarits (NVS) at SFr 40, Holcim (HCMLF) at SFr 44, Roche (RHHBY) at SFr 125 and many many more such deals. The opportunity cost was tremendous. After the market recovered I started selling securities which I did not understand or was not comfortable with. This meant sometimes selling at big losses. Some of the businesses like Posco (PKX), Ternium (TX), Ampco-Pittsburgh (AP) and Tower Group (TWGP), I sold because I got them at a price which did not give me sufficient margin of safety. The positions were too small to have an effect on my portfolio overall and it would have been tiring to keep track of so many picks.  As you see, I have let go of Credit Suisse (CS) at a large loss. But the opportunity cost of that money sitting in this stock and I not knowing what to do with it if it tanks again, was too much for me. I decided that it was much better for me and my portfolio to have the cash and wait until the opportunity presents itself, as Warren Buffet says Quote: My goal for the rest of the year is to find good businesses which will get me out of the hole I have dug myself into.
Righting the ship
Posted by: C.W.R.
(IP Logged)
Date: March 18, 2012 02:27PM
I once read "A small loss frightens - a large one tames." I have my own losses I could share. I actually consider losing money a necessary part of the learning curve. It is like tuition for the university of the stock market. My own 'tuition' was paid two years after beginning my study of the stock market from the point of view of value investing. I was looking at stocks like Toyota and Citigroup at the time and looking for a bargain position. Remember that at the time, C was the world's largest bank by market cap. I remember being impressed with their vision of growth, from my cursory reading of news items; no analysis at all... So when Citigroup fell by half from mid $50's to $25, I thought to myself "this is the bargain I've been looking for." I went ahead and bought shares at $25 and went to have lunch with my mentor in the stock market. He was surprised I had bought and calmly advised me to sell, never mind taking a small loss as this was my first foray on my own. So I took his advice and sold at $21. He told me "never catch a falling knife". "Always buy stocks on the way up after they have bottomed." So I watched as Citigroup fell to just over $1 per share. My relief was so great, I promised my friend a first-class Thai buffet lunch at the Mandarin Oriental Hotel in Bangkok. (we were going anyways... I bought him a few other things equal to the amount of money he had saved me). Thanks for being the first to start a series on learning from investor losses. This is invaluable knowledge that should be the starting point to a long and successful investing career. Cheers!
Righting the ship
Posted by: tonyg34
(IP Logged)
Date: March 19, 2012 12:53AM
cdub - you've been one of the more prolific contributors on this site and I have enjoyed your ideas and you're good writer (which is why you are a value contest winner) but if I may offer one small bit of advice, you have made more trades in 2012 than I have in the last 5 to 10 years and most them are for small $500 positions (and $30 dollar losses). You don't need to run a mutual fund. I risk being presumptuous here, but I think I've been through what you're going through. You have invested a lot of time/effort in learning about markets and researching all of these interesting opportunities and you feel you have to do something to verify all that work. That's what I did in my twenties, but its too much effort for too little reward. My advice: wait for the fat pitch - in the mean time make your regular contributions to a Roth (or whatever your company offers) - but let your personally managed money pile up until you get an easy one, they happen if you keep looking. Keep up the good work and thanks for sharing/letting me babble
Righting the ship
Posted by: cdubey
(IP Logged)
Date: March 19, 2012 02:12AM
@Tony worse still ... I have made even more trades than the one posted above. These are my losing ones. I also sold some for small profits. Thankfully, these are sells and I have done this to do exactly what you write. This "mutual fund" was created before I started learning. Most of the pitches were expert recommendations from motleyfool rising star :( I can't blame them for my own stupidity though. Batbeer2 also told me the same thing. And you are both right. This is the reason behind me selling these "deals" and moving to cash. Wait for the fat pitch is what I am going to do. Thanks for reading and offering advice.
Righting the ship
Posted by: superguru
(IP Logged)
Date: March 19, 2012 11:37AM
"waiting for fat pitch" - Can be a long wait sometimes but it is worth the wait than doing something foolish.
One thing I learned in last 5 years of investing, and thanks a lot to Gurufocus and posters here, Value investing works and works brilliantly. Even when I bought badly, as I bought at discount, those stocks bounced back and I could get out at break even or slight profit. Only stock I lost money on was RHIE (following Seth blindly). Yes, I could have done much better in last 5 years than the measly 56% cummulative return. But I am not complaining considering 5 years back I did not even know the difference between stock and bond.
Righting the ship
Posted by: BEL-AIR
(IP Logged)
Date: March 19, 2012 09:10PM
Waiting for the right pitch, and waiting for undervaluations,is the key as far as I am concerned.
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