I don’t plan to sell VVTV anytime soon. Although the gain is nice, it hasn’t reached my intrinsic value yet and I wont be bummed out even if it drops again. Valuation is still too cheap on this one.

Mr Buffett. A truly great investor but I know that I can’t replicate him and shouldn’t try. There are some things that are outside of my realm and trying to do what he does is one of them. He does buy great companies but what most people forget is what you mentioned. He gets a hellava deal on most of the things he buys that are not available to anyone else.

Regarding the market, while I agree that the majority of stocks will trade with the market, when it comes to under appreciated and contrarian picks, I think the market doesn’t matter as much. Previously the market was based on fear and dropped the price of everything. This also meant that the market was cheap and the market has realized that to some degree. Problem is that even the crap stuff go up with it.

In the end, it’s important not to get overwhelmed and overexcited about the current movement. Get out when given the chance.

On the selling, my take is if someone is using strictly fundamentals you have to sell when the valuation gets slightly rich. That is pretty easy to do if you got a good price on the stock. Easier said than done though of course if your holding for years and years.

ie you have to pretty much predict the future of the company bc they could tap new markets, develop a new product, improve margins/ROI etc. That’s why companies like Apple continue to sport high valuations and keep soaring. I respect Buffett more than any other investor even on his macro economics but I thought about his record a lot and his best investments like Washington Post etc were so good bc he got such a sweet deal “PLUS” took the helm of the company and improved it like a Carl Icahn. So, his success a lot is as much his ability to “improve” a company bc of his size that we can’t do as small investors. He’s also been a genius I feel at predicting our economy. only 1 in 100,000 people can duplicate his strategies effectively I feel.

The other thing you guys have to realize about valuation and stock picking is most companies will trade with the overall market. I mean just look at this rally.

Do you really think the fundamentals support such a huge rally in all these companies? for most stocks you are almost better off predicting the overall market and basing your sell decisions on it which sounds crazy but it often works that way. We all think the companies fundi’s are all that matter but the inflows and outflows of capital in the markets decides where and “when” the money managers put capital to work most of the time. Herd mentality. The opportunities to play contrarian and use value investing work more bc the economy booms and busts. Of coures some companies are exceptions but something to think about.

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Buffett is a master investor of great businesses and so is Munger and you can’t go wrong with those two men. They’ve proved that long term buy and hold is not dead but the only problem with Buffett is that he rarely sells.

Since his holding period is “forever” I’m speculating that he finds it difficult to always know when to sell as well lol.
(That was a joke) Buffett had great businesses in JNJ but sold a part of it for a better investment in preferred shares and also sold when realising his mistake with COP.

The point that I was trying to make, was to say that if one buys with the reasoning to hold for the very long term; i.e. through thick and thin– then one is forced to choose a higher quality of business.

In that sense, I am simply reiterating Warren Buffett or Charlie Munger’s philosophy. In practice, I seem to follow both the Graham style (that you mentioned) and the Buffett style. I think it is important to not just have one strict rule, but rather a framework to deduce an answer to the great question “when to sell?”

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With the spreadsheet, Atwood’s fair value will be incorrect due to their capital intensive business model. Their FCF growth is rather dismal because they are continually maintaining and investing in their business.

With ATW, I see 2-3 other competitors you should also be looking at. RIG, DO and HERO.
RIG is the industry leader with more rigs. I chose ATW because of its size as well as its profitability and past performance.

So when looking at capital intensive companies, look at their cash flows. Earnings have never meant much so its not that big of a deal.

Also, read the annual reports about the secured contracts. I’m a bit short on time at the moment but let me know if you need further assistance.

Thanks for the thoughtful comment and I completely understand where you’re coming from but I’ve found out that even excellent business lose value and since price follows value, there is always a possibility that my previous estimate may be very wrong. The company may still be great, but if the upside and margin of safety is gone, there is no reason to continue holding.

However, if the business maintains its value but keeps dropping in price, then its worth adding to the position.

I like your reference to marriage but I will have to respectfully disagree on this one. While a marriage involves commitment no matter how bad the situation, an investment should be thrown out if things start going sour. If I find a company that I find to offer better returns I will go after it, rather than wait for my initial investment to recover. To me it’s about getting a “satisfactory return”, which is what Graham emphasized. 10% may be satisfactory to some, 15% to others or 25% for me.

In the end it all points towards what your personality and strategy is focused on. I originally thought I was a buy and hold for 10 years type of guy. Turns out I didn’t know myself too well. I much prefer to get my hands on everything, go through everything, do the hard work and reap the rewards regardless of the timeline, industry or company.

[...] When to sell stocks [...]

If things change that’s another reason for selling. Hope does kill an investor after all.

When I first started, I thought of myself as a passive investor. This meant that if a good company reached its intrinsic value, given that it had a good moat, it should continue to perform at its average growth rate over the long run. Also, being long term minded I thought I would be satisfied with, say a 10% annual return.

What do I do? I stick to my business, and if I have fire power left, I average down my cost. I follow a handful of excellent businesses for years and wait for the opportunity to buy them. Just because some other business that I don’t know very well is cheap too, doesn’t mean that I should run after that one.

It is like marriage. You find a wife/husband– you know them thoroughly and invest a great time and money into them (in form of a family, etc.). Just because you see some “hottie” walking around, you don’t just dump your long term investment in your family.

I like to own businesses that will last a long time, i.e. 30-80% of my lifetime.

When to sell them? I still am not sure; but selling them in a depressed market seems foolish even if it earns a handful of more yield points in the short term.

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