Having written that, one should also note that Graham mentioned that "value" stocks will be punished every bit and maybe more in a downturn. If you can raise cash during the period to keep chugging then great, but then why go through that headache? I would rather take advice from a writer like Harry Schultz who advocates for capital protection first and foremost. Who's to say in a real downturn you have the means to keep adding cash? What if you need to tap into the cash you would have had?
Difference between you and I is that you think a downturn will hit everything. I don't. I think the excess is concentrated in certain sectors. That's what makes 2024 slightly different to the past. Dotcom was similar and the only reason other industries got hit especially hard (like travel) was because of 9/11 and overvaluation in more places (cyclicals) etc. Some industries haven't really done anything in the last few years - will they get hit hard? Maybe a 20-25% correction, but that's manageable. Especially if they have solid management, healthy balance sheets...
Something I took from early Dr. Burry writing & even guys like Schultz is to take your profits. Set mental stops and review them daily to see where the stock is. Has support broken? If so, time to cut and move on to something else. I once did have the buy & hold mindset that folks like Buffett or even Lynch preach about, but it just doesn't work for me anymore. Not to mention Lynch had a pretty high turnover himself if I recall with somewhere around 300% in the early years and later down to somewhere around 100% - so even he didn't really live that.
Funny - we've gone opposite ways. I began trying to take a Burry approach. Now I'm more inclined to a Buffett approach. Buying and holding is what I want to do. I don't want to sell. I've been terrible at snatching at profits - and lost money doing it last year. I picked many stocks that doubled or more but lost money using those profits to feed losers. What's worse is I didn't even like the "loser" stocks - they started as small, speculative positions but my irrationality made them bigger and bigger in my portfolio until they were more than 20/30%! And when I eventually swallowed the loss, it destroyed my portfolio.
This year, I'm not selling my profitable positions and my time horizon is longer. I'm not interested in 0-100% returns in less than a few months. That said, if the stock does fall 20%+ on actual news, I re-evaluate. CUTR was my first try at a proper "buy and hold." But I got my forecasts totally out of whack and there's no way I could rationally buy more. I had no choice but to sell at a loss.
Also, my effort this year is to keep as little stocks in my portfolio as possible. Additions have to be really, really good to get me to adjust. I mentioned Dell at the beginning of this year - and made the mistake I made last year of using a profit to fund CUTR. Difference was, I genuinely believed Dell was roughly right and CUTR was significantly undervalued. That's a different mistake, I suppose.
I agree that our investment approaches will all be different. And I do believe I'm getting better as I find better rules to abide by. Another new rule I've asked myself (after the events of CUTR) is "How much do I stand to gain if everything goes well and what is the potential loss - and what are the odds of both?" The emphasis is on the latter question. Simple enough and everyone knows it. But if you don't actively work it out, you can get carried away in a stock that might 5x-10x and forget that it could very well go to zero!
Last summer, I was all about being aggressive and I remember you calling me out on it - this year, I don't want to be aggressive. I want to be calculated and measured. Easier said than done, of course!
Yes, of course, invest how you feel comfortable. I'm a student with no real "life" concerns. I'm trialling methods and am learning. I have refrained from putting too much into the market because I, myself, haven't got a method I fully trust yet. That means in order to fully understand what works I have to use the cash and not sit on it. You, otoh, sound a little older with more responsibilities. That alone makes us different in terms of our risk profiles.
Good debate on a Bear thread! >g< |
