Conviction, part 3
I like to look at my real world portfolio every so often and see if I can spot any common trends.
There are a few positions I acquired using what I thought of as a 'half-position'. Usually I try to keep my portfolio manageable in terms of number of names; my 'average' position size is about 8% of my portfolio (down from 10% due to AAPL outperformance.) However, these names only got a position size of 4%.
At the time, I was thinking, "These are long-term bets, somewhat speculative, and I'm less sure about them than I am about my usual value or growth play, which I expect to quickly increase." In other words, less conviction than usual.
Each of these names promptly lost between 40 and 50% of their value, meaning I need a one-bagger from this point to show even a tiny profit on them. Even though they represented minimal stakes with regard to position size, they have together accounted for 80% of my portfolio's losses in the past 2 years.
I think the pattern of thinking and behavior I have noted in myself is most interesting here, rather than the individual stocks in question. But because my readers love to ridicule me, and most don't seem to understand or care that I am trying to improve my performance with analysis like this, I will put the 3 names in question out there: P, BAC, and C.
The two stocks, by the way, that I bought with unshakeable conviction, are AAPL and PM, and I have been rewarded handsomely.
Sitting back to try to learn from your mistakes is a good exercise. I recommend it.