Two Quick Pointers
This post is going to be very short.
Two quick pointers to mention here.
- Sitting on Your Ass
- The “GEICO” moment
Sitting On Your Ass (SOYA)
Ask someone in the room, do they feel smart ever taking profits after a quick 50-100% increase within a year? The answer is a resounding YES.
The truth is so far from it, though.
What if those company share prices continued to grow by 200 to 500% in the next 4 – 5 years? Well, not so “smart” now.
Every single day, there are bad things happening in the world.
Today, it could be the trade war tension. Tomorrow, it could be rumours of war breaking out in Middle East.
Again, there are so many smart reasons why you should sell your stock. You can never look dumb taking profits of your portfolio.
But honestly, you’re being dumb selling your stocks over small events of the world.
For people who base their entire investment philosophy on the newscycle, they would totally miss out on the enormous gains. You see, there are news cycle change so quickly that things will look bad today and it will look good tomorrow.
Are we going to base our investment decisions on something that’s ever-changing such as news or are we going to base our investment decisions on our assessment of business models?
The answer is very clear.
Few years ago, I felt like an absolute idiot because I sold an undervalued company because of some irrational fear. 3 months later, the share price was up by another 100%.
I can’t even describe how painful was the opportunity lost.
Do you see Warren Buffett make his decisions based on the fleeting news? Or whether he is buying into sustainable, high-quality business models back by a capable and honest management team?
In the past, I felt like I was an idiot who thought I was smarter than the market. I’d buy stocks here and there and sell stocks in an instant. Well, now I know long term investing is my sole advantage in the sea of ever-changing newcycles and confusion.
I know of so many fund managers who excel very well by doing nothing… actually, they are doing something ,which is “sitting on their asses” on good companies.
We always feel that if we are managing our portfolio actively, it may produce better returns. It’s not always the case.
Think of your portfolio like a seed being planted, you want it to grow into a beautiful tree. After planting the seed, would you dig up the seed after 5 hours and see whether it is growing? Or you’ll give it time and start to see something erupting from the soil?
Then, would you cut the leaves because you wonder to yourself… why is this plant not bearing any fruits?
The things we do to our portfolio is very oxymoron.
Control what you can control (finding great businesses at sound valuations), and don’t even try to time the market.
Today, I am trying to be a smarter idiot. I am still an idiot at many occasions.
THe “GEICO” moment
As a fan of Warren Buffett, I knew that Warren made a unconventional decision as a 20 year old. When he found out about an insurance company called GEICO, he was intoxicated by the company.
He wasted no time and traveled from New York City and arrived in Washington. He stood outside of GEICO’s HQ for so long until the janitor led him to Lorimer “Davy” Davidson who became the future CEO of GEICO.
Later, Davy extended his time and spent the entire afternoon sharing about GEICO business to the young Buffett. He considered that event as extraordinary piece of luck because Davy was the only staff working on a non-working Saturday.
In Buffett’s words, “that afternoon changed my life.”
It was his “GEICO” moment.
It changed his life and he built Berkshire Hathaway on GEICO’s insurance float.
The story can be found over here.
Two nights ago, I could not sleep hence I went to email the management of a listed company. I told him that I’m keen to meet him and learn about his business. I think this company, given the correct execution, it could be a 3 – 5x bagger in the next 3 – 4 years.
Just like how young Buffett had his “GEICO” moment, hopefully, I will have my own “company X” moment.
Awaiting his response.
2 Responses
Nice Read! I’m curious what is the company that you mention.
Geico was the only stock in his portfolio at the time I think. It is fine to focus only on very few stocks if we know what we are doing.
Excellent point that we should not practice short term profit taking. It is easier to know how a company will do 3-5 years later instead of next quarter.
Hey bro! I’ll message you.
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