Conviction, Humility, and Value Traps
Fantastic article! Spotify was always my favorite write-up, but this one takes the cake! 👌🏼
Well-curated ideas and I appreciate you tying them together in practical insights.
Really helpful, thanks, Alex.
My initial foray into an investing education was a strategy that was predicated on the idea of building your wishlist of quality businesses and then waiting for short-term "events" that caused Mr. Market to panic "unnecessarily" (so you can buy that quality with an ever-elusive MOS). In other words, wait for the perfect time to be a pig and then eat. Pretty classic WEB stuff (be greedy when others are fearful, etc).
The biggest challenge I've found with this strategy in practice is quite simply recognizing the potential long-term severity of an "Event" and being smarter than the market in those moments (oh conviction, where art thou). Take, for instance, the food health scare Chipotle experienced in 2015. In hindsight, the market completely overreacted and this was a perfect time to be a Pig. But in the moment, this was always a potential massive issue to their business model (fast food using fresh ingredients...#noteasy). This example was used time and time again by the person I was learning from as the "see, it works" case study, and while I of course understand the concept, I'm just coming to grips with the fact that it's easier said than done.
Currently, I'm facing this decision with $ATVI. The issues are quite severe and relate directly to the quality of the business, so I'm not likely going to view this "event" as a buying opportunity, and will instead likely be selling (as the issues at hand go directly against my investment practice of only owning companies that make the world better). On the flip side, I went in on Adobe during a sector-wide drop earlier this year that had nothing to do with any performance issues, and that has proven to be a great call (so far).
Anyways, I'm rambling now. But this is such an important topic so I appreciate you taking the time to dig here. Thanks again, and damn if this shit ain't hard!
Great Article Alex !! Focus on long term investment thesis and when to average down are very important in my view..