Good write up, thanks. Considering the biggest mistakes great investors have made in their careerers, and the asymmetry in missed returns from a great compounder vs a mistake, erring on the side of holding (when a company has optionality and a decade+ runway ahead) is my default.
I've also this year started labeling a few positions I hold as "permanent" positions (my highest conviction ones which I've held usually for a few years). Whilst this label can change if the competitive dynamic changes for them, having a few labelled like this helps with my decision making process of what to trim for a new opportunity, or to hold and not trim when these "permanent" holdings get expensive-looking.
Similar to the Mungar "never sell CostCo" or Mohnish with Raysas (unless the father/son team changes)
Yep I would say I also err on the side of holdings thing for long even if they are not playing out. I've sold 3 positions of my total 20 investments, and in all of those I considered the thesis to be broken so didn't care much about the price they were trading at
One of the advantages (although generally a disadvantage) of the lack of liquidity of start-up investments, it's a forcing function to keep in invested
completely agree with this approach. Selling purely based on valuation misses the bigger picture—especially when owning companies with strong optionality that’s hard to quantify. Like he said, valuation multiples alone don’t tell the full story, and defining a “nosebleed” multiple isn’t straightforward.
I also appreciate the emphasis on clearly documenting the investment thesis and tracking how it evolves over time. This helps avoid “thesis creep” and keeps the process rational rather than emotional.
Most importantly, shifting the sell rule to underperformance versus a benchmark (rather than just a fixed percentage loss) makes a lot of sense. It helps avoid knee-jerk selling during market downturns while still cutting losses on truly underperforming positions.
Overall, this disciplined and flexible mindset balancing patience with pragmatic risk management
I'm in this position with Netflix. I first bought in 2013 and it has clearly been a long term outperformer (sheer dumb luck). Now it's about a 30 bagger and by far the biggest individual stock position in my portfolio. I feel the business continues to get better but I guess the question is, does it remain among that 4% or has most of the juice been squeezed. Investing is hard even when you get lucky.
Great post. I'm currently at such a point with Edenred. Regulation fears have killed the stock and I've double down, making it a 10% position. Downside should be very protected and time will tell if it was a good decision.
The idea of selling one something underperforms by 20% never occurred to me because it sounds counter intuitive. Over what time frame is that? Adyen for example is a prime example against time.
One thought on the selling rule, it could have a negative impact if the drop in share price is sharp because of a news event, but then recovers a majority of the loss within a few weeks.
Maybe adding an extra rule to say if it's following a 12% daily drawdown, wait 2 weeks before selling?
Having been invested in Tesla, this has happened multiple times normally recovering within a week. Another recent case, my (bad timing) initial position in Hims & Hers, the next day it dropped 30%+. But within a few days, it's recovered half the initial decline
Good write up, thanks. Considering the biggest mistakes great investors have made in their careerers, and the asymmetry in missed returns from a great compounder vs a mistake, erring on the side of holding (when a company has optionality and a decade+ runway ahead) is my default.
I've also this year started labeling a few positions I hold as "permanent" positions (my highest conviction ones which I've held usually for a few years). Whilst this label can change if the competitive dynamic changes for them, having a few labelled like this helps with my decision making process of what to trim for a new opportunity, or to hold and not trim when these "permanent" holdings get expensive-looking.
Similar to the Mungar "never sell CostCo" or Mohnish with Raysas (unless the father/son team changes)
Yep I would say I also err on the side of holdings thing for long even if they are not playing out. I've sold 3 positions of my total 20 investments, and in all of those I considered the thesis to be broken so didn't care much about the price they were trading at
One of the advantages (although generally a disadvantage) of the lack of liquidity of start-up investments, it's a forcing function to keep in invested
completely agree with this approach. Selling purely based on valuation misses the bigger picture—especially when owning companies with strong optionality that’s hard to quantify. Like he said, valuation multiples alone don’t tell the full story, and defining a “nosebleed” multiple isn’t straightforward.
I also appreciate the emphasis on clearly documenting the investment thesis and tracking how it evolves over time. This helps avoid “thesis creep” and keeps the process rational rather than emotional.
Most importantly, shifting the sell rule to underperformance versus a benchmark (rather than just a fixed percentage loss) makes a lot of sense. It helps avoid knee-jerk selling during market downturns while still cutting losses on truly underperforming positions.
Overall, this disciplined and flexible mindset balancing patience with pragmatic risk management
is exactly how I approach investing too.
Almost never.
Portfolio balances every year or every 2 years. Otherwise no sells 😉
Good thinking. Case creep is the enemy
I'm in this position with Netflix. I first bought in 2013 and it has clearly been a long term outperformer (sheer dumb luck). Now it's about a 30 bagger and by far the biggest individual stock position in my portfolio. I feel the business continues to get better but I guess the question is, does it remain among that 4% or has most of the juice been squeezed. Investing is hard even when you get lucky.
Great post. I'm currently at such a point with Edenred. Regulation fears have killed the stock and I've double down, making it a 10% position. Downside should be very protected and time will tell if it was a good decision.
The idea of selling one something underperforms by 20% never occurred to me because it sounds counter intuitive. Over what time frame is that? Adyen for example is a prime example against time.
Time frame is personal, but maybe 6M/1Y to revalue the situation!
One thought on the selling rule, it could have a negative impact if the drop in share price is sharp because of a news event, but then recovers a majority of the loss within a few weeks.
Maybe adding an extra rule to say if it's following a 12% daily drawdown, wait 2 weeks before selling?
Having been invested in Tesla, this has happened multiple times normally recovering within a week. Another recent case, my (bad timing) initial position in Hims & Hers, the next day it dropped 30%+. But within a few days, it's recovered half the initial decline