SlideShare ist ein Scribd-Unternehmen logo
1 von 6
Downloaden Sie, um offline zu lesen
The Conviction To Hold
IAN CASSEL AUGUST 19, 2014
Extraordinary returns follow extraordinary discipline. Discipline in buying and selling, and
maybe the most important one of all, holding. Developing the conviction to hold is
something that I’ve learned over time. It didn’t come easy. The basis of this article is to
give some insight on how to develop the conviction to hold your winners. It is very
tempting to sell along the way, and it’s okay to take a little off the table, but the big money
is made by holding.
“It never was my thinking that made the big money for me. It always was my sitting.” —
Reminiscences of a Stock Operator
Many of us, myself included, look at stocks that have made big moves and think to
ourselves, “If I would have only knew about that company and bought it back then.” But
would you really have developed the conviction to hold during the run up? The problem is
that to achieve a multi-bagger in the portfolio, you have to hold a multi-bagger. And if you
want it to change your life, you need to hold a lot of it.
Don’t bother finding the next multi-bagger if you aren’t going to develop the
conviction to hold it
Over the last decade, I’ve been lucky enough to be invested in a few stocks that have
gone up 5-10-20-30x over a multi-year time horizon. From my experience, the only way
to hold onto a big position after it makes a big move is to know the underlying company
better than anyone else. Greed and fear will test your resolve, so you need to learn to
keep these emotions in check. You need to believe in your due diligence and form an
unwavering conviction.
So how do you develop the conviction to hold?
A lot of due diligence is on the front-end of a buying decision, but it certainly doesn’t stop
there. The maintenance due diligence following the buy decision is even more important.
For me, I talk to management regularly and keep close watch of all the ancillary forces
and trends that are driving the company’s business. My “edge” is knowing my positions
better than anyone else. This doesn’t mean I’m going to be right, but the more I know the
better.
I think many misperceive high conviction for close-mindedness, ignorance, and
arrogance. The conviction I’m talking about is quite the opposite. You need to constantly
assess your positions and openly listen to counter arguments. Only then will you have
the conviction to hold multi-baggers because you will understand all sides to the story.
You also need to develop a thick skin. If you are not ready to be criticized for your
convictions than you aren’t ready to make real money.
I believe most investors focus too much on selling strategies and not enough time on
knowing what they own. Selling strategies such as, “Sell half after a stock doubles” or
“When a position reaches 10% of the portfolio, sell it down to 8%” are meant for lazy
investors. These selling metrics-formulas-strategies sound great in academia or when
selling an investment strategy to a bunch of lemmings who can’t think for themselves.
The truth is if you know what you own at all times, you’ll know when to sell.
In many cases the stocks I’ve owned were better buys after they doubled then when I
initially bought them. In many cases when a position became 30% of my portfolio there
was a reason for it. The underlying business was doing really well, or institutions were
just starting to nibble on shares, so why would I sell it. Just because a stock doubles,
triples, etc, doesn’t mean it should be sold. Stocks should be sold when your
maintenance due diligence shows something has changed. If you know the story better
than anyone, you’ll likely get clues well before the rest of the market. When a company
performs, and the story hasn’t changed, stop trying to change it. Enjoy the ride.
When a stock goes on a multi-year run there will be long periods of time when nothing
happens. These are consolidation periods when old shareholders are selling and new
investors are buying in. You will notice a 12-month period of time in this three-year chart
where the stock does nothing. This is very normal.
Even in this amazing chart you’ll find a 10-month period where the stock didn’t go anywhere.
A big part of successful investing is becoming content doing nothing. If you are in great
companies, a lot of times your biggest risk is boredom. Warren Buffett’s famous quote,
“Our favorite holding period is forever”. If he likes where the business is headed, he’ll
continue to hold it and probably buy more. Don’t be active for activity sake. Remember,
there are no day traders on the Forbes 400 list. Learn to be content holding and doing
nothing.
“Patience	
  is	
  power.	
  
Patience	
  is	
  not	
  an	
  absence	
  of	
  action;	
  
rather	
  it	
  is	
  “timing”	
  
it	
  waits	
  on	
  the	
  right	
  time	
  to	
  act,	
  
for	
  the	
  right	
  principles	
  
and	
  in	
  the	
  right	
  way.”	
  
— Fulton	
  J.	
  Sheen	
  
	
  
As a microcap investor who invests in companies with little to no institutional ownership, I
want to hold for the institutional rally. When a management continues to execute on a
great story, at some point it’s going to attract institutional inflows. You will see this when
an illiquid stock all of sudden gets propelled by a sustained period of above average
volume. Hello Institutions!
You can literally see the institutional rally in this chart of Vertex Energy (VTNR):
A multi-year run is made up of a bunch of mini-cycles that can last weeks or months.
During these times the stock can become undervalued or overvalued. Quite a few
professional investors I know like to trade 10-20% of their full position during these
swings. For my psyche I’ve found it to be counter productive. If I own a $5 stock and
think it might go back to $4 before it goes to $10 in 12 months, I’m fine simply holding it
through the mini-cycles.
I hope I’ve helped shed some light on a hard but lucrative topic. Many investors spend all
their time trying to find great microcap companies only to sell them after quick paltry
gains. If management is executing and the story hasn’t changed, hold on for the real
money. Find great companies, develop the conviction to hold them, and it will change
your life.
	
  
The Art of Holding
IAN CASSEL JANUARY 20, 2017
Stocks rarely perform in the time frames we predict, and it’s why the market only works
for investors that have a long-term portfolio focus. Performance is never linear, up and to
the right, year after year. You sometimes have to hold onto a position for a few years
before it goes up 100% in 3 months.
“I’m accustomed to hanging around with a stock when the price is going nowhere. Most of the
money I make is in the third or fourth year that I’ve owned something.” – Peter Lynch
Here is a real-life example: I started buying a company I own today in early 2012 when it
was at $0.35-0.40 per share. As my conviction grew I bought more and by mid-2014 the
stock hit $2.00 per share. Today (January 2017), the stock is still at $2.00 per share.
Yes, I’m up considerably from my average cost basis but this company has been dead
money for 2.5 years. Years!
How do I know if I’m right in holding versus just being entrenched in endowment bias?
Let’s get back to some first principles. Sustainable multi-baggers have three
characteristics: Long-term revenue and earnings growth with little to no dilution. When
you are holding onto a position ask yourself – Is this business growing and making more
money per share than it did a year ago, two years ago? In my real-life example above
the company’s business is almost double the size it was 2.5 years ago. Yes, the stock
hasn’t gone anywhere but the business is doing really well. I have no problem holding
this stock. If the business wasn’t performing, I would sell. Successful investors can
differentiate business performance from stock performance and can take advantage of
those investors who can’t.
“I don’t want to spend my time trying to earn a lot of little profits. I want very, very big profits that I’m
ready to wait for.” – Phil Fisher
In the book, The Art of Execution, portfolio manager Lee Freeman-Shor invests $25-$150
million ($1+ billion total) in 45 of the world’s top investors. His instructions to them were
simple as there was just one rule. They could only invest in their ten best ideas. Over
several years he tracked their positions, trades, performance and was amazed at what
he saw. He identified both good and bad habits and divided the investors into groups –
Rabbits, Assassins, Hunters, Raiders, and the most successful group, the Connoisseurs.
“The most successful investors I worked with, those who made the most money, all had one thing in
common: the presence of a couple of big winners in their portfolios. Any approach that does not
embrace the possibility of winning big is doomed.” – Lee Freeman-Shor
In this excerpt, Lee Freeman-Shor talks about one of the attributes of Connoisseurs.
“One of the key requirements of staying invested in a big winner is to have (or cultivate) a high
boredom threshold.
Meeting some of my Connoisseurs could be very, very boring because nothing ever changed. They
would talk about the same stocks they had been invested in for the past five years or longer. On the
days I had a meeting scheduled with a Connoisseur, I sometimes struggled to get out of bed.
The fact is, most of us will find it difficult to emulate the Connoisseurs because we feel the need to do
something when we get to the office (or home trading desk) every day. We look at stock price charts,
listen to the latest market news on Bloomberg TV, and fool ourselves into believing we could add
value from making a few small trades here and there. It is very hard to do nothing but focus on the
same handful of companies every year; only researching new ideas on the side.
Many of us, seeing we have made a profit of 40% in one of our stocks, start actively looking for
another company to invest the money into – instead of leaving it invested. This is precisely why lots
of investors never become very successful.”
Every multi-bagger will have long periods (even years) of stagnation as fundamentals
backfill, old shareholders get bored, and new shareholders enter. Just like a fine wine,
sustainable multi-baggers often take their time to ascend and develop. If you’re invested
in great businesses that continue to grow and earn more money, don’t let lulls in stock
price and boredom scare you out of them.
	
  

Weitere ähnliche Inhalte

Was ist angesagt?

9 investing secrets of Warren Buffett
9 investing secrets of Warren Buffett9 investing secrets of Warren Buffett
9 investing secrets of Warren Buffettkunal2279
 
Rich dad, poor dad
Rich dad, poor dadRich dad, poor dad
Rich dad, poor dadRichard Go
 
Warren e. buffet (presentation)
Warren e. buffet (presentation)Warren e. buffet (presentation)
Warren e. buffet (presentation)indonesiabelajar
 
How to-invest-in-the-philippine-market-for-newbies 1-
How to-invest-in-the-philippine-market-for-newbies  1-How to-invest-in-the-philippine-market-for-newbies  1-
How to-invest-in-the-philippine-market-for-newbies 1-tarpmike
 
Top Dividend Paying Stocks That Keep On Climbing
Top Dividend Paying Stocks That Keep On ClimbingTop Dividend Paying Stocks That Keep On Climbing
Top Dividend Paying Stocks That Keep On ClimbingDividend Stocks Research
 
Berkshire hathaway & Warren Buffet
Berkshire hathaway & Warren BuffetBerkshire hathaway & Warren Buffet
Berkshire hathaway & Warren BuffetLoui Malayil
 
Secrets of-the-millionaire-mind-t.-harv-eker
Secrets of-the-millionaire-mind-t.-harv-ekerSecrets of-the-millionaire-mind-t.-harv-eker
Secrets of-the-millionaire-mind-t.-harv-ekerZeena Boo
 
6 rulesforinvestinginstocks download-final
6 rulesforinvestinginstocks download-final6 rulesforinvestinginstocks download-final
6 rulesforinvestinginstocks download-finalchhun ratana
 
Investment Books and My Journey.
Investment Books and My Journey.Investment Books and My Journey.
Investment Books and My Journey.Manish Dhawan
 
Women & Money Mindset
Women & Money MindsetWomen & Money Mindset
Women & Money MindsetLisa Smith
 
Guide To Understanding The Stock Market
Guide To Understanding The Stock MarketGuide To Understanding The Stock Market
Guide To Understanding The Stock MarketLakesia Wright
 
MysticWealth's presentation at 4th Annual IIF, mumbai.
MysticWealth's presentation at 4th Annual IIF, mumbai.MysticWealth's presentation at 4th Annual IIF, mumbai.
MysticWealth's presentation at 4th Annual IIF, mumbai.Manish Dhawan
 
Harvest Financial Partners WST Interview Aug 2016
Harvest Financial Partners WST Interview Aug 2016Harvest Financial Partners WST Interview Aug 2016
Harvest Financial Partners WST Interview Aug 2016Jim Wright
 
Hedge Funds Performance
Hedge Funds PerformanceHedge Funds Performance
Hedge Funds PerformancePeter Coenen
 

Was ist angesagt? (20)

9 investing secrets of Warren Buffett
9 investing secrets of Warren Buffett9 investing secrets of Warren Buffett
9 investing secrets of Warren Buffett
 
Rich dad, poor dad
Rich dad, poor dadRich dad, poor dad
Rich dad, poor dad
 
Warren e. buffet (presentation)
Warren e. buffet (presentation)Warren e. buffet (presentation)
Warren e. buffet (presentation)
 
How to-invest-in-the-philippine-market-for-newbies 1-
How to-invest-in-the-philippine-market-for-newbies  1-How to-invest-in-the-philippine-market-for-newbies  1-
How to-invest-in-the-philippine-market-for-newbies 1-
 
Top Dividend Paying Stocks That Keep On Climbing
Top Dividend Paying Stocks That Keep On ClimbingTop Dividend Paying Stocks That Keep On Climbing
Top Dividend Paying Stocks That Keep On Climbing
 
Psychology secrets of the millionaire mind
Psychology   secrets of the millionaire mindPsychology   secrets of the millionaire mind
Psychology secrets of the millionaire mind
 
Berkshire hathaway & Warren Buffet
Berkshire hathaway & Warren BuffetBerkshire hathaway & Warren Buffet
Berkshire hathaway & Warren Buffet
 
Rich dad poor dad
Rich dad poor dadRich dad poor dad
Rich dad poor dad
 
Secrets of-the-millionaire-mind-t.-harv-eker
Secrets of-the-millionaire-mind-t.-harv-ekerSecrets of-the-millionaire-mind-t.-harv-eker
Secrets of-the-millionaire-mind-t.-harv-eker
 
The Value Firm
The Value FirmThe Value Firm
The Value Firm
 
Financial Literacy
Financial LiteracyFinancial Literacy
Financial Literacy
 
6 rulesforinvestinginstocks download-final
6 rulesforinvestinginstocks download-final6 rulesforinvestinginstocks download-final
6 rulesforinvestinginstocks download-final
 
Investment Books and My Journey.
Investment Books and My Journey.Investment Books and My Journey.
Investment Books and My Journey.
 
Women & Money Mindset
Women & Money MindsetWomen & Money Mindset
Women & Money Mindset
 
Fundraising-faq
Fundraising-faqFundraising-faq
Fundraising-faq
 
Guide To Understanding The Stock Market
Guide To Understanding The Stock MarketGuide To Understanding The Stock Market
Guide To Understanding The Stock Market
 
MysticWealth's presentation at 4th Annual IIF, mumbai.
MysticWealth's presentation at 4th Annual IIF, mumbai.MysticWealth's presentation at 4th Annual IIF, mumbai.
MysticWealth's presentation at 4th Annual IIF, mumbai.
 
Harvest Financial Partners WST Interview Aug 2016
Harvest Financial Partners WST Interview Aug 2016Harvest Financial Partners WST Interview Aug 2016
Harvest Financial Partners WST Interview Aug 2016
 
Hedge Funds Performance
Hedge Funds PerformanceHedge Funds Performance
Hedge Funds Performance
 
2017 11-21 jh
2017 11-21 jh2017 11-21 jh
2017 11-21 jh
 

Ähnlich wie 2017 12-30 ic

The five rules for successful stock investing .pptx
The five rules for successful stock investing .pptxThe five rules for successful stock investing .pptx
The five rules for successful stock investing .pptxRishabhShah368192
 
Penny stock alerts
Penny stock alertsPenny stock alerts
Penny stock alertsMdAlAmin320
 
Top 8 share trading tips for successful traders
Top 8 share trading tips for successful tradersTop 8 share trading tips for successful traders
Top 8 share trading tips for successful tradersGerryspeck
 
Stock trading tips - trading expectations
Stock trading tips  - trading expectationsStock trading tips  - trading expectations
Stock trading tips - trading expectationsPractice of Law
 
PROFILE OF A SUCCESSFUL INVESTOR
PROFILE OF A SUCCESSFUL INVESTORPROFILE OF A SUCCESSFUL INVESTOR
PROFILE OF A SUCCESSFUL INVESTORSREENIVAS IYER
 
The Ultimate Property Investment Guide1
The Ultimate Property Investment Guide1The Ultimate Property Investment Guide1
The Ultimate Property Investment Guide1Praveen Sudarsan
 
Stock trading tips - view stocks like a market maker
Stock trading tips  - view stocks like a market makerStock trading tips  - view stocks like a market maker
Stock trading tips - view stocks like a market makerPractice of Law
 
16 habits that stop you becoming a forex millionaire
16 habits that stop you becoming a forex millionaire16 habits that stop you becoming a forex millionaire
16 habits that stop you becoming a forex millionairePlatinumforex
 
Analysis Of Penny Stock Case Study
Analysis Of Penny Stock Case StudyAnalysis Of Penny Stock Case Study
Analysis Of Penny Stock Case StudyBethany Rodriguez
 
Warren Buffett: Notes From The Q&A Between Ivey MBA, HBA Students
Warren Buffett: Notes From The Q&A Between Ivey MBA, HBA StudentsWarren Buffett: Notes From The Q&A Between Ivey MBA, HBA Students
Warren Buffett: Notes From The Q&A Between Ivey MBA, HBA StudentsKoon Boon KEE
 
Penny stock-alerts
Penny stock-alertsPenny stock-alerts
Penny stock-alertsMdAlAmin320
 
Penny stock-alerts
Penny stock-alertsPenny stock-alerts
Penny stock-alertsMdAlAmin320
 
How to sabotage your sales with bad assumptions.docx
How to sabotage your sales with bad assumptions.docxHow to sabotage your sales with bad assumptions.docx
How to sabotage your sales with bad assumptions.docxMaha Researchlabs
 
Still struggling with money
Still struggling with moneyStill struggling with money
Still struggling with moneyjamesservices
 
Your+Retirement +June+2004
Your+Retirement +June+2004Your+Retirement +June+2004
Your+Retirement +June+2004Martin Demarest
 

Ähnlich wie 2017 12-30 ic (20)

The five rules for successful stock investing .pptx
The five rules for successful stock investing .pptxThe five rules for successful stock investing .pptx
The five rules for successful stock investing .pptx
 
Penny stock alerts
Penny stock alertsPenny stock alerts
Penny stock alerts
 
Top 8 share trading tips for successful traders
Top 8 share trading tips for successful tradersTop 8 share trading tips for successful traders
Top 8 share trading tips for successful traders
 
FINAL REPORT
FINAL REPORTFINAL REPORT
FINAL REPORT
 
FINAL REPORT
FINAL REPORTFINAL REPORT
FINAL REPORT
 
2019 01-15 jk
2019 01-15 jk2019 01-15 jk
2019 01-15 jk
 
Ctr07302015
Ctr07302015Ctr07302015
Ctr07302015
 
Ctr07302015
Ctr07302015Ctr07302015
Ctr07302015
 
Stock trading tips - trading expectations
Stock trading tips  - trading expectationsStock trading tips  - trading expectations
Stock trading tips - trading expectations
 
PROFILE OF A SUCCESSFUL INVESTOR
PROFILE OF A SUCCESSFUL INVESTORPROFILE OF A SUCCESSFUL INVESTOR
PROFILE OF A SUCCESSFUL INVESTOR
 
The Ultimate Property Investment Guide1
The Ultimate Property Investment Guide1The Ultimate Property Investment Guide1
The Ultimate Property Investment Guide1
 
Stock trading tips - view stocks like a market maker
Stock trading tips  - view stocks like a market makerStock trading tips  - view stocks like a market maker
Stock trading tips - view stocks like a market maker
 
16 habits that stop you becoming a forex millionaire
16 habits that stop you becoming a forex millionaire16 habits that stop you becoming a forex millionaire
16 habits that stop you becoming a forex millionaire
 
Analysis Of Penny Stock Case Study
Analysis Of Penny Stock Case StudyAnalysis Of Penny Stock Case Study
Analysis Of Penny Stock Case Study
 
Warren Buffett: Notes From The Q&A Between Ivey MBA, HBA Students
Warren Buffett: Notes From The Q&A Between Ivey MBA, HBA StudentsWarren Buffett: Notes From The Q&A Between Ivey MBA, HBA Students
Warren Buffett: Notes From The Q&A Between Ivey MBA, HBA Students
 
Penny stock-alerts
Penny stock-alertsPenny stock-alerts
Penny stock-alerts
 
Penny stock-alerts
Penny stock-alertsPenny stock-alerts
Penny stock-alerts
 
How to sabotage your sales with bad assumptions.docx
How to sabotage your sales with bad assumptions.docxHow to sabotage your sales with bad assumptions.docx
How to sabotage your sales with bad assumptions.docx
 
Still struggling with money
Still struggling with moneyStill struggling with money
Still struggling with money
 
Your+Retirement +June+2004
Your+Retirement +June+2004Your+Retirement +June+2004
Your+Retirement +June+2004
 

Mehr von Mats Larsson (20)

2018 12-15 dc
2018 12-15 dc2018 12-15 dc
2018 12-15 dc
 
2018 10-14 hm
2018 10-14 hm2018 10-14 hm
2018 10-14 hm
 
2018 06-20 hm
2018 06-20 hm2018 06-20 hm
2018 06-20 hm
 
2018 06-07 bc
2018 06-07 bc2018 06-07 bc
2018 06-07 bc
 
2018 05-27 bt
2018 05-27 bt2018 05-27 bt
2018 05-27 bt
 
2018 05-01 sg
2018 05-01 sg2018 05-01 sg
2018 05-01 sg
 
2018 04-22 jc
2018 04-22 jc2018 04-22 jc
2018 04-22 jc
 
2018 04-15 sp
2018 04-15 sp2018 04-15 sp
2018 04-15 sp
 
2018 04-08 at
2018 04-08 at2018 04-08 at
2018 04-08 at
 
2018 04-02 bcg
2018 04-02 bcg2018 04-02 bcg
2018 04-02 bcg
 
2018 03-18 ms
2018 03-18 ms2018 03-18 ms
2018 03-18 ms
 
2018 02-11 mh
2018 02-11 mh2018 02-11 mh
2018 02-11 mh
 
2018 02-09 acm
2018 02-09 acm2018 02-09 acm
2018 02-09 acm
 
2018 01-28 sp
2018 01-28 sp2018 01-28 sp
2018 01-28 sp
 
2018 01-25 hm
2018 01-25 hm2018 01-25 hm
2018 01-25 hm
 
2018 01-18 jg
2018 01-18 jg2018 01-18 jg
2018 01-18 jg
 
2017 12-18 bijg
2017 12-18 bijg2017 12-18 bijg
2017 12-18 bijg
 
2017 12-16 wa
2017 12-16 wa2017 12-16 wa
2017 12-16 wa
 
2017 12-10 13 d
2017 12-10 13 d2017 12-10 13 d
2017 12-10 13 d
 
2017 09-24 rs
2017 09-24 rs2017 09-24 rs
2017 09-24 rs
 

Kürzlich hochgeladen

Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...IMARC Group
 
Fabric RFID Wristbands in Ireland for Events and Festivals
Fabric RFID Wristbands in Ireland for Events and FestivalsFabric RFID Wristbands in Ireland for Events and Festivals
Fabric RFID Wristbands in Ireland for Events and FestivalsWristbands Ireland
 
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfChicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfSourav Sikder
 
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfAMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfJohnCarloValencia4
 
MC Heights construction company in Jhang
MC Heights construction company in JhangMC Heights construction company in Jhang
MC Heights construction company in Jhangmcgroupjeya
 
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISING
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISINGUNLEASHING THE POWER OF PROGRAMMATIC ADVERTISING
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISINGlokeshwarmaha
 
Tata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerakTata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerakEditores1
 
Plano de marketing- inglês em formato ppt
Plano de marketing- inglês  em formato pptPlano de marketing- inglês  em formato ppt
Plano de marketing- inglês em formato pptElizangelaSoaresdaCo
 
7movierulz.uk
7movierulz.uk7movierulz.uk
7movierulz.ukaroemirsr
 
Intellectual Property Licensing Examples
Intellectual Property Licensing ExamplesIntellectual Property Licensing Examples
Intellectual Property Licensing Examplesamberjiles31
 
Entrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizationsEntrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizationsP&CO
 
A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.mcshagufta46
 
To Create Your Own Wig Online To Create Your Own Wig Online
To Create Your Own Wig Online  To Create Your Own Wig OnlineTo Create Your Own Wig Online  To Create Your Own Wig Online
To Create Your Own Wig Online To Create Your Own Wig Onlinelng ths
 
Slicing Work on Business Agility Meetup Berlin
Slicing Work on Business Agility Meetup BerlinSlicing Work on Business Agility Meetup Berlin
Slicing Work on Business Agility Meetup BerlinAnton Skornyakov
 
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 Building Your Personal Brand on LinkedIn - Expert Planet-  2024 Building Your Personal Brand on LinkedIn - Expert Planet-  2024
Building Your Personal Brand on LinkedIn - Expert Planet- 2024Stephan Koning
 
Data skills for Agile Teams- Killing story points
Data skills for Agile Teams- Killing story pointsData skills for Agile Teams- Killing story points
Data skills for Agile Teams- Killing story pointsyasinnathani
 
Live-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry WebinarLive-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry WebinarNathanielSchmuck
 
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...AustraliaChapterIIBA
 
NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023Steve Rader
 

Kürzlich hochgeladen (20)

Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
 
Fabric RFID Wristbands in Ireland for Events and Festivals
Fabric RFID Wristbands in Ireland for Events and FestivalsFabric RFID Wristbands in Ireland for Events and Festivals
Fabric RFID Wristbands in Ireland for Events and Festivals
 
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfChicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
 
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfAMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
 
MC Heights construction company in Jhang
MC Heights construction company in JhangMC Heights construction company in Jhang
MC Heights construction company in Jhang
 
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISING
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISINGUNLEASHING THE POWER OF PROGRAMMATIC ADVERTISING
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISING
 
Tata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerakTata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerak
 
Plano de marketing- inglês em formato ppt
Plano de marketing- inglês  em formato pptPlano de marketing- inglês  em formato ppt
Plano de marketing- inglês em formato ppt
 
7movierulz.uk
7movierulz.uk7movierulz.uk
7movierulz.uk
 
Intellectual Property Licensing Examples
Intellectual Property Licensing ExamplesIntellectual Property Licensing Examples
Intellectual Property Licensing Examples
 
Entrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizationsEntrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizations
 
WAM Corporate Presentation Mar 25 2024.pdf
WAM Corporate Presentation Mar 25 2024.pdfWAM Corporate Presentation Mar 25 2024.pdf
WAM Corporate Presentation Mar 25 2024.pdf
 
A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.
 
To Create Your Own Wig Online To Create Your Own Wig Online
To Create Your Own Wig Online  To Create Your Own Wig OnlineTo Create Your Own Wig Online  To Create Your Own Wig Online
To Create Your Own Wig Online To Create Your Own Wig Online
 
Slicing Work on Business Agility Meetup Berlin
Slicing Work on Business Agility Meetup BerlinSlicing Work on Business Agility Meetup Berlin
Slicing Work on Business Agility Meetup Berlin
 
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 Building Your Personal Brand on LinkedIn - Expert Planet-  2024 Building Your Personal Brand on LinkedIn - Expert Planet-  2024
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 
Data skills for Agile Teams- Killing story points
Data skills for Agile Teams- Killing story pointsData skills for Agile Teams- Killing story points
Data skills for Agile Teams- Killing story points
 
Live-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry WebinarLive-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry Webinar
 
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
 
NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023
 

2017 12-30 ic

  • 1. The Conviction To Hold IAN CASSEL AUGUST 19, 2014 Extraordinary returns follow extraordinary discipline. Discipline in buying and selling, and maybe the most important one of all, holding. Developing the conviction to hold is something that I’ve learned over time. It didn’t come easy. The basis of this article is to give some insight on how to develop the conviction to hold your winners. It is very tempting to sell along the way, and it’s okay to take a little off the table, but the big money is made by holding. “It never was my thinking that made the big money for me. It always was my sitting.” — Reminiscences of a Stock Operator Many of us, myself included, look at stocks that have made big moves and think to ourselves, “If I would have only knew about that company and bought it back then.” But would you really have developed the conviction to hold during the run up? The problem is that to achieve a multi-bagger in the portfolio, you have to hold a multi-bagger. And if you want it to change your life, you need to hold a lot of it. Don’t bother finding the next multi-bagger if you aren’t going to develop the conviction to hold it Over the last decade, I’ve been lucky enough to be invested in a few stocks that have gone up 5-10-20-30x over a multi-year time horizon. From my experience, the only way to hold onto a big position after it makes a big move is to know the underlying company better than anyone else. Greed and fear will test your resolve, so you need to learn to keep these emotions in check. You need to believe in your due diligence and form an unwavering conviction. So how do you develop the conviction to hold? A lot of due diligence is on the front-end of a buying decision, but it certainly doesn’t stop there. The maintenance due diligence following the buy decision is even more important. For me, I talk to management regularly and keep close watch of all the ancillary forces and trends that are driving the company’s business. My “edge” is knowing my positions better than anyone else. This doesn’t mean I’m going to be right, but the more I know the better. I think many misperceive high conviction for close-mindedness, ignorance, and arrogance. The conviction I’m talking about is quite the opposite. You need to constantly assess your positions and openly listen to counter arguments. Only then will you have the conviction to hold multi-baggers because you will understand all sides to the story. You also need to develop a thick skin. If you are not ready to be criticized for your convictions than you aren’t ready to make real money.
  • 2. I believe most investors focus too much on selling strategies and not enough time on knowing what they own. Selling strategies such as, “Sell half after a stock doubles” or “When a position reaches 10% of the portfolio, sell it down to 8%” are meant for lazy investors. These selling metrics-formulas-strategies sound great in academia or when selling an investment strategy to a bunch of lemmings who can’t think for themselves. The truth is if you know what you own at all times, you’ll know when to sell. In many cases the stocks I’ve owned were better buys after they doubled then when I initially bought them. In many cases when a position became 30% of my portfolio there was a reason for it. The underlying business was doing really well, or institutions were just starting to nibble on shares, so why would I sell it. Just because a stock doubles, triples, etc, doesn’t mean it should be sold. Stocks should be sold when your maintenance due diligence shows something has changed. If you know the story better than anyone, you’ll likely get clues well before the rest of the market. When a company performs, and the story hasn’t changed, stop trying to change it. Enjoy the ride. When a stock goes on a multi-year run there will be long periods of time when nothing happens. These are consolidation periods when old shareholders are selling and new investors are buying in. You will notice a 12-month period of time in this three-year chart where the stock does nothing. This is very normal. Even in this amazing chart you’ll find a 10-month period where the stock didn’t go anywhere.
  • 3. A big part of successful investing is becoming content doing nothing. If you are in great companies, a lot of times your biggest risk is boredom. Warren Buffett’s famous quote, “Our favorite holding period is forever”. If he likes where the business is headed, he’ll continue to hold it and probably buy more. Don’t be active for activity sake. Remember, there are no day traders on the Forbes 400 list. Learn to be content holding and doing nothing. “Patience  is  power.   Patience  is  not  an  absence  of  action;   rather  it  is  “timing”   it  waits  on  the  right  time  to  act,   for  the  right  principles   and  in  the  right  way.”   — Fulton  J.  Sheen     As a microcap investor who invests in companies with little to no institutional ownership, I want to hold for the institutional rally. When a management continues to execute on a great story, at some point it’s going to attract institutional inflows. You will see this when an illiquid stock all of sudden gets propelled by a sustained period of above average volume. Hello Institutions! You can literally see the institutional rally in this chart of Vertex Energy (VTNR):
  • 4. A multi-year run is made up of a bunch of mini-cycles that can last weeks or months. During these times the stock can become undervalued or overvalued. Quite a few professional investors I know like to trade 10-20% of their full position during these swings. For my psyche I’ve found it to be counter productive. If I own a $5 stock and think it might go back to $4 before it goes to $10 in 12 months, I’m fine simply holding it through the mini-cycles. I hope I’ve helped shed some light on a hard but lucrative topic. Many investors spend all their time trying to find great microcap companies only to sell them after quick paltry gains. If management is executing and the story hasn’t changed, hold on for the real money. Find great companies, develop the conviction to hold them, and it will change your life.  
  • 5. The Art of Holding IAN CASSEL JANUARY 20, 2017 Stocks rarely perform in the time frames we predict, and it’s why the market only works for investors that have a long-term portfolio focus. Performance is never linear, up and to the right, year after year. You sometimes have to hold onto a position for a few years before it goes up 100% in 3 months. “I’m accustomed to hanging around with a stock when the price is going nowhere. Most of the money I make is in the third or fourth year that I’ve owned something.” – Peter Lynch Here is a real-life example: I started buying a company I own today in early 2012 when it was at $0.35-0.40 per share. As my conviction grew I bought more and by mid-2014 the stock hit $2.00 per share. Today (January 2017), the stock is still at $2.00 per share. Yes, I’m up considerably from my average cost basis but this company has been dead money for 2.5 years. Years! How do I know if I’m right in holding versus just being entrenched in endowment bias? Let’s get back to some first principles. Sustainable multi-baggers have three characteristics: Long-term revenue and earnings growth with little to no dilution. When you are holding onto a position ask yourself – Is this business growing and making more money per share than it did a year ago, two years ago? In my real-life example above the company’s business is almost double the size it was 2.5 years ago. Yes, the stock hasn’t gone anywhere but the business is doing really well. I have no problem holding this stock. If the business wasn’t performing, I would sell. Successful investors can differentiate business performance from stock performance and can take advantage of those investors who can’t. “I don’t want to spend my time trying to earn a lot of little profits. I want very, very big profits that I’m ready to wait for.” – Phil Fisher In the book, The Art of Execution, portfolio manager Lee Freeman-Shor invests $25-$150 million ($1+ billion total) in 45 of the world’s top investors. His instructions to them were simple as there was just one rule. They could only invest in their ten best ideas. Over several years he tracked their positions, trades, performance and was amazed at what he saw. He identified both good and bad habits and divided the investors into groups – Rabbits, Assassins, Hunters, Raiders, and the most successful group, the Connoisseurs.
  • 6. “The most successful investors I worked with, those who made the most money, all had one thing in common: the presence of a couple of big winners in their portfolios. Any approach that does not embrace the possibility of winning big is doomed.” – Lee Freeman-Shor In this excerpt, Lee Freeman-Shor talks about one of the attributes of Connoisseurs. “One of the key requirements of staying invested in a big winner is to have (or cultivate) a high boredom threshold. Meeting some of my Connoisseurs could be very, very boring because nothing ever changed. They would talk about the same stocks they had been invested in for the past five years or longer. On the days I had a meeting scheduled with a Connoisseur, I sometimes struggled to get out of bed. The fact is, most of us will find it difficult to emulate the Connoisseurs because we feel the need to do something when we get to the office (or home trading desk) every day. We look at stock price charts, listen to the latest market news on Bloomberg TV, and fool ourselves into believing we could add value from making a few small trades here and there. It is very hard to do nothing but focus on the same handful of companies every year; only researching new ideas on the side. Many of us, seeing we have made a profit of 40% in one of our stocks, start actively looking for another company to invest the money into – instead of leaving it invested. This is precisely why lots of investors never become very successful.” Every multi-bagger will have long periods (even years) of stagnation as fundamentals backfill, old shareholders get bored, and new shareholders enter. Just like a fine wine, sustainable multi-baggers often take their time to ascend and develop. If you’re invested in great businesses that continue to grow and earn more money, don’t let lulls in stock price and boredom scare you out of them.