PORTFOLIO UPDATE: IT’S LIKE THAT
During the trading day Friday, I tweeted the following:
To be clear, this decision to reduce WMIH was a performance decision rather than anything having to do with my opinion about the market. All of my trend indicators remain bullish. I have very little reason to believe this uptrend is in the midst of turning into anything unfriendly during the weeks ahead.
After experiencing a flat Q1 with respect to performance, it is obvious that the portfolios need to be rebalanced a bit in order to get performance back to where it should be at this stage of the year. Irrespective of my opinion of WMIH, the pullback has crossed my line in the sand for anything that warrants holding a large position in the name. For the time being, it will remain a mid-sized position.
In the search for performance there are no attachments to any single idea. This is something that both retail and professional investors have a difficult time grasping. It may just be the most difficult emotional aspect of investing to overcome.
When you put countless hours of research into an investment, there comes a certain attachment to an outcome that you, as an investor, become dependent on in order to validate your methodology. What way too many investors tend to do is put more credence into their research than what the market is telling them at that very moment. Furthermore, the ability to detach oneself from a single investment, instead choosing to make the decision that is best for the overall portfolio is extremely difficult.
The making winning picks, doing research and taking small losses on insignificant position part is easy. It is the Wall Street version of popcorn and a movie. The difficult part is countering your own faith and conviction in any conceived predetermined outcome. You counter than conviction the moment you reduce or eliminate a position because your portfolio performance is sending you a different set of information than the Utopian scenario you had foreshadowed months ahead. No questions asked, you just do it.
And that friendly friends is what creates long-term winning investors in the stock market.
As of the close Friday, 60% long in SPNS, WMIH, JMBA, IWSY and MITL. 40% in cash.
