A Broken Investment Thesis
I am curious to see what you all think about closing positions when your investment thesis in a company appears broken.
I may be in the minority here, but I wouldn't say I like to close positions in these companies -- say $Teladoc Health(TDOC.US$ , $Peloton Interactive(PTON.US$ , $Latch(LTCH.US$ , or $AppHarvest(APPH.US$ for me.
I would love to have a "tidier" portfolio and put this money to work elsewhere, but most investors I admire have said that their biggest mistake was selling a stock too early.
In this weird sense, I have a kind of FOMO -- even when my investment thesis for a company isn't currently intact.
Mostly, this keeps me from thinking I'm smarter than I am -- getting too trigger-happy when I incorrectly feel a thesis is broken and selling right away -- and doing this too frequently.
Instead, I hold the position, stop adding, and let it run and rightsize itself to my portfolio, accumulating more data over a longer time frame.
Who is to say my investment thesis for the company was correct in the first place? $SPDR S&P 500 ETF(SPY.US$ $Invesco QQQ Trust(QQQ.US$
What do you do with a broken investment thesis in your portfolio?
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Violets : I sell and reinvest all the time probably not the best thing LOL
FirstStrike Veteran : I will do you one better than just taking on the vote button. I think you must take the to look into each company before investing in them dining because you asked this question. If your doing the research and your thesis turned out to be incorrect, then it's up to you to research more and try to understand what the company is doing for their shareholders. TDOC had a great run while the pandemic was more main stream, so now with the ease of the talk about Pandemic TDOC had suffered. What are there plans to take market share away from other companies? Are they actively trying to make the company better?
I believe there are plenty of other companies doing what TDOC is going so what are they doing to be the best product out there?
I hope this helps a little and honestly if you were to sell I think you would be selling near the bottom.
Revelation 6 : I won’t continue to pour resources into a losing position. I don’t need to stroke my ego. If it’s lost, it’s lost. Time to regroup and reinvest somewhere else. Of course this doesn’t happen overnight. It takes some time to evaluate that a position has been lost.
Butch G Violets: Me too Violet. Better that than to get caught holding a failing stock!