I had ended up owning stocks which I did not necessarily believe in but stayed invested because of several reasons — which can be likely be grouped under the term “bullshit”. I was coat-tailing in some (BAC, SAN) and hoping for a turnaround in others (FTE, EOAN).
I was reading this excellent blog by Prof. Sanjay Bakshi and came across the case of “three legged stool” [read it here]. I have suffered from this fallacy for a while now.
Today I decided to sell every company in my portfolio that I did not understand or had done insufficient research on to justify an investment. Bank of America, Banco Santander, Orange and E.On for example are too big and convoluted to get a clear picture of. In case of E.On and Orange — the management does not seem focussed on creating shareholder value.
I now own the following companies: Fortress, Tesco, Altius, Weight Watchers, Nam Tai, ArcelorMittal, Intel, Bouygues, CAF and PostNL.
I have decided to add an item on my investment checklist. Draw a line, which if crossed will qualify the position to be sold.
I also sold PostNL, mainly because they have decided to sell their TNT stake to shore up their balance sheet. This destroys the margin of safety for which I invested.