PORTFOLIO UPDATE: WANDERING IN THE LAND OF THE ABSTRACT AND IMPERFECT
There are many facets of traditional portfolio management that I believe are ineffective. One of the most serious offenses against the habit of effective portfolio management is sticking to an investment thesis that is being disproved by the market, clinging onto statistics of a fundamental nature that inherently lag price. There isn't a disaster in investing that has not had the words "but the fundamental outlook seemed so great," attached to it. Just ask those who bought AAPL at 600+ last year. Or real estate investors in Las Vegas and Miami in 2006. Or even the investors who were clamoring to buy BAC at 50+ in 2007.
All of the aforementioned modern day lessons in cultivating capital losses have an investor attachment to a fundamental scenario that is on the edge of a cliff in common. You won't find clues of what is to come in any 10-Q, press release or investor presentation. Often times, management at the company doesn't realize that the the land is shifting beneath their feet.
The greater wisdom of the financial markets is the only tool that accurately surmises when a fundamental shift of dramatic proportion is occurring in any one industry or sector. And the greater wisdom of the financial markets is only evident in price and volume. If you sit around and wait for a press release or analyst rating to get you out of a failing company or industry you will be getting out with every other Joe who is searching for the exact same information you are in order to make an effective decision. This isn't kindergarten recess we are talking about here, where you get hugs for scraping your knee and sliced fruit when you need a snack. This is capital allocation where your capital is up for grabs the minute you place into the arena of the finance. There are no hugs here without a kick in the groin. And any sliced fruit you are offered will likely be laced with arsenic.
The ability of the investor to accurately gauge and react to information is what creates the difference between success and failure. The information necessary to make the decision that sets you apart from the stampeding herd will always be abstract and imperfect in nature. It is conceptual rather than factual. And that is why so many who are successful in every other endeavor they have attempted fail so miserably in finance, trading, investing or whatever you choose to label it as. Wall Street is a consistent exercise of making decisions using abstract, imperfect information. There is nothing in the "real world" that prepares one for such an arena. In fact, the real world teaches one to make decisions based on factual information, with conceptual or abstract information being given the heave-ho when it comes to prudent decision making.
Look outside of the traditional, instead focusing on areas of analysis that either lack understanding or are ignored by a majority of market participants.
With all of that said, here is the most recent portfolio update.
During the trading day Friday, I tweeted the following:
MITL was brought on board as a position in January. The price action in the company, especially in the face of endless gains in the market, has been downright lackluster. I can't justify keeping money in a seemingly perpetual sideways asset when other portfolio names like WMIH, IWSY and JMBA are on the move. I'm open to looking at the company again down the road. Need to see better participation in the name before I take another look, however.
