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TMFtheEdge (99.21)

Wiping the slate clean

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April 03, 2008 – Comments (0) | RELATED TICKERS: MIDD , CMG

I have read about a hedge fund manager who suggested "wiping the slate clean" i.e. selling all your stock positions for the benefit of gaining clarity in mind.  I think that this method was radical but also did not discount the fact that embracing such a process just in thought was worth a try.

Philip Fisher spoke of the irrational stockholder behaviour in holding on just to not lose a few pennies or not being able to accept selling at a loss. On the onset, his comments looked obvious and logical but in practice, it's also obvious that money often clouds the logical process of the mind. 

Frankly speaking, I am not immune and have fallen to such tendencies. So, let's give it a shot.  I currently hold the following stocks:

http://www.icarra.com/viewPortfolio.php?id=1035

There has been some winners and one spectacular paper loss. To add a twist to this, I must admit that I tend to like the Gardner brothers style of investing in search of the multi-bagger. I only recently began to appreciate David G's flamboyant method better because it inheretly latches on to a positive trend. In contrast, my view is that David rarely ventures into trying to figure out what value story may work ... and run the risk of finding a empty "cigar-butt" (Graham). My limited experience tells me that stocks are often cheap for a good reason.

So, what are the business stories from my stock portfolio which I think will be multibaggers 20 years from now?  

FIRST TEAM: CMG, NFLX, MIDD, DLB

SECOND TEAM: IIVI, SNHY, VLCM, BWLD

THIRD TEAM: FMD,MWA

Speaking generally (without too much details), my first team represents stocks which I think pretty much have the market in which they compete in within their comfort level of influence. The team should be able to perform in good times and bad and would have fair ability to dictate their direction.

My second team represents stocks which I think will still outperform the market, but not to the spetacular levels of a Starbucks. 

My third team are stocks which risks have appeared which was not initially seen. E.g. for all the positive stories of water infrastructure replacement, it appears that MWA has less comfortable control over whether the positive stories turn into hard business deals.

This process has thought me that I have systematically underweighted what I preceive as my clearer winners. This was due to my enthuasism in trying too hard to secure better value points for my stocks.

Lesson learnt and food for thought, I must say. Open for comments. 

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