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Conviction, part 3



July 01, 2012 – Comments (6)

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. 

6 Comments – Post Your Own

#1) On July 02, 2012 at 9:10 AM, lemoneater (57.23) wrote:

Ikkyu2, imitation is the best compliment. I've enjoyed your other blogs in this series. I've thought about checking my top 10 gainers out of 26 stocks total.

ISRG is my highest at 153% gain. TTM at 115%. PANL at 103%. IPHS at 93%. PSO at 76%. VZ at 59%. NHI at 45%, TSM at 44%, XLNX at 29%, and KMB at 26%.  The first listed was beginner's luck, but I was more educated in my other guesses.

I regret not buying Amazon when it was $30 a share some years back. I should have sold something else. I need to have the discipline to keep enough cash on hand at all times to allow me to buy when I see a good opportunity.  

I've sold my worse losers, but I still have some that I'm thinking about what to do with.  EKDKQ at -95% I bought for sheer sentiment although I knew bankruptcy was around the corner. These following three I knew were volatile and I'm ambivalent about them at the moment.CEL is -82% and BSI is -77% and VUOCD is -50%.

Feel free to question any of my stocks. Sometimes criticism is more valuable than agreement.

Have a Happy 4th!




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#2) On July 02, 2012 at 11:31 AM, Valyooo (34.54) wrote:

BAC taught me my biggest stock lesson.  I traded it a few times, and made more money than I lost, but I got fed up with it and it really made me think.  I know it is a piece of crap company, and it made me decide to stop buying crap companies just because the price is cheap.  I am not an accountant and I have no inside info, therefore I should only be buying companies I think will do well in the future, not try to figure out the price of a company I hate.

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#3) On July 02, 2012 at 2:12 PM, ikkyu2 (98.18) wrote:

It is, I think, a sad day when a careful and competent investor names the Bank of America "a piece of crap company," which he "hate[s]."

The company was once the flower of American banking.  The reason I own a stake is that at the present moment it has little in the way of competition in the retail banking sector - C and JPM - and that I do not believe that there has been a fundamental transformation in banking; I believe that the company may recover.

Those are interesting picks and good numbers, lemoneater; I only recognize 5 of the 10 names, so I will have to do a little work.  Are you still holding IPHS?  I thought that dog had had its day.

By the way, I never thanked you properly for your lovely pot-holders, which are hanging above the sink.  I was looking at them the other day; they did, unfortunately, outlast the marriage itself.  So it goes. 

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#4) On July 02, 2012 at 2:19 PM, outoffocus (23.85) wrote:

Re: Lemoneater's potholders,

I just used them the other day to make a fresh batch of rasberry zucchini bread. =D

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#5) On July 02, 2012 at 5:33 PM, Valyooo (34.54) wrote:

Who ever said I was careful or competent?

Those are not the only competitors though. WFC is a serious threat.  USB amd other good regionals are as well too.  People are starting to switch to credit unions.  Nobody trusts BofA anymore.  I don't think I could count the number of law suits against them.  Their technology and customer support is awful, and their leadership is a mess.  And where is the dividend?

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#6) On July 03, 2012 at 2:10 PM, lemoneater (57.23) wrote:

@ #3 Yes, I still have IPHS.  IPHS has been a lullaby compared to the discord I had with TRA. I wanted to invest in a commodity and it filled the bill. It does have a beta of 1.5 but I got it so low that it would really need to drop before I worry.

Let me know what you find out about my other stocks.

rd80 is brave, but I have learned that banks are beyond my feeble powers of analysis.

Glad that you liked the potholders (and you too, outoffocus.) They were fun to make. Crocheted potholders are an interesting commercial conundrum--the perfect illustration of a product that could bankrupt a producer. Friends would say sell them, but the amount of time involved made them cost ridiculously high. Not to mention I would quickly saturate the market because they are too durable and weaken demand-an observation my husband made.( I invest partly because I do not plan to support myself through crocheting.) Yet, I continue to make them, because being creative in even a slight way is very rewarding. 

Happy 4th! Drink plenty of lemonade.


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