Battle Scars

Ian Cassel Blog, Educational Leave a Comment

Often times your biggest opponent is you. You look for reasons to sell because the stock isn’t moving. You buy something else. The thing you sold immediately goes up. Then you realize you are just like everybody else. Nothing screws with your head more than watching something you used to own outperform the things you own. It’s those stocks you used to own that could have and should have changed your life. They haunt your soul. Battle scars.

Have you ever bought and held a stock/business and made 100-500-1000%+? When you look back at the win you realize the thing that propelled the stock wasn’t even in your thesis. The win was all luck. You start wondering, “Am I good or am I lucky?” Battle scars.

Have you ever bought and held a stock/business and made 100-500-1000%+? The win was 10-years ago. If you went back in time with today’s wisdom you would never buy that stock. You realize how much you’ve grown. You start wondering, “Am I evolving in good ways or bad ways?” Battle scars.

Have you ever bought a stock/business early? But maybe you bought it too early. You hold for a year and nothing happens. Investing is hard because in the moment we don’t know if “smart holding” is actually “dumb holding”. Sometimes being too early is the same thing as being wrong. Battle scars.

Have you ever bought a stock/business after a mountain of work and it went nowhere? The company “sort of” performs to your expectations – enough to keep you holding. The stock acts like a piece of driftwood in the ocean. It has no direction – floating around between +50/-50% from your cost basis. Sometimes the most painful positions aren’t the ones that go down but the ones that go nowhere. Battle scars.

Have you ever bought a stock/business and held too long? Let’s wait another quarter. “Just another quarter” stocks can drive you insane. You hope the business inflects. You hope the business accelerates. You hope they sign a partnership. You hope they get the financing done. You hope. You accumulate so much knowledge on the position trying to justify holding that it almost becomes your prison. You can’t let it go. You can’t get out. You want to be right so bad. Being right becomes more important than making money. Battle scars.

Have you ever bought and held a stock/business and the CEO lied to you or embellished the truth? You thought you knew them. You thought they were better than that. It’s painful when trust is broken. Battle scars.

Have you ever bought and held a stock/business, the stock drops, and you get frustrated that new investors are getting a better price than you did? You paid full price right before it went on sale. These new investors did half the work you did and now they are getting the stock 40-50% cheaper. They don’t deserve it. You held on when no one else would. You deserve to gain the most for what you’ve been through. Battle scars.

Have you ever bought and held a stock/business and then let the world know about it? You attach your name to it. You write about it. You tweet about it. In fact, that stock becomes your identity. It’s like the symbol is tattooed on your forehead. Worse yet you tell friends and family. Then the thesis changed, and you feel humiliated. You lost money, but worse yet you helped people you love lose money. Battle scars.

As stock pickers you will accumulate battle scars. Especially in micro and smallcap stocks where the spectrum of outcomes are wider – more violent. The more battle scares you accumulate the more the risk gets scared out of you. You hesitate instead of acting instinctively. As conviction investors you need to accept you won’t be perfect. You will buy stocks you shouldn’t. You will sell winners too soon. You will hold losers too long. You will get lucky and you will get unlucky. You will make mistakes.

The key is a consistent due diligence process, checklist, framework, the investment principles you apply to your watchlist and existing positions. It’s the consistency that allows you to benchmark new ideas against other opportunities and against what you already own. A consistent research process, due diligence and order ranking ideas is very important and it can become your greatest asset as an investor as this knowledge accumulates over years and decades. More importantly you will be able to find the signal in the noise of your own experiences. This will keep the battle scars of the past from accumulating.

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