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Strategies & Market Trends : Value Investing
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bruwin
To: Nya_Quy who wrote (63440)3/14/2020 10:54:08 AM
From: E_K_S1 Recommendation   of 78776
 
the new CEO had other plans, which have messed up the company's valuation.
I have had these types of positions where a 'New' CEO is supposed to bring a lot of possibilities and opportunities to the company (a strategic plan) and re-structure those non performing assets. There have been times where this just did not happen and these things always take longer than expected (18 months at best to see results). The payoff can be huge too but can create a 'value' trap if little or no progress is made.

New management is key to any turnaround and the investor must understand what the 'strategic' plan is, how long will it take, what it will cost and some way to measure progress. I will stay into the investment (and buy more if I see progress) when I have this information.

Remember, new money you add must be evaluated based on all 'other' new companies you can invest into at that time vs buying more of the same issue. This is another mistake I have made so I always limit the size of any one position to a 1%-2% portfolio position. My expectations are that this could grow to a 5% portfolio position if everything works out. (Note: most times I start a 0.5% portfolio position so I can watch news and if change is being made).

Today I can Buy new positions 20% lower than what they were 30 days ago, so my new capital looks at all of these new possibilities.

These are the intangibles one learns over a long period of time investing in many companies each w/ their set of problems/issues and opportunities. The value investor must try to understand the risk/rewards, be open to worst case and best case outcomes but most importantly have a management team that represents their interests (the stock holder) and the expertise to make the changes necessary to get the job done.

I guess the hardest thing for me to learn that have owned (or owns) similar value positions is to determine when to sell and move on. 40 years doing this my answer is the earlier the better because preserving your investment capital is most important. I have gone thru too many company BK's (holding on for 8-12 months too long) when it was really better to just sell and move on.

It is good you are learning and evaluating your positions, taking note of key changes by management and insiders and can look at both the good and bad in an investment.

My biggest takeaway is you must have a good management team and the longer they have been around w/ a history is a net positive (vs somebody new brought in to fix problems). A New CEO can be an unknown and typically takes 18 months to effect change. Watch the people/partners that are brought in to help w/ implementing the strategic plan.

Good investing

EKS
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