There is a certain sense of worth that can be derived from discussing openly errors that have been made in one's own analysis. I have purposely made the past few years of blogging and Tweeting about the markets as transparent as possible. I date everything I do in terms of chart work. I provide monthly updates as to my opinions of each investment I have discussed. I provide detailed research of each new investment that is made.
With this type of transparency readers get to view what have been mostly good results, with a sprinkle of flea flickers that have been bungled along the way. I have the need to discuss the bungled plays of this past year due to the fact that I am facing a slight bit of mental anguish regarding a decision that was made in Q1 of this year. By pouring out my heart and soul it should act as a type of exorcism that will abolish this anguish for good while creating understanding of why such an error in judgement took place.
This year there hasn't been much that has gone wrong. Nearly every name that I have profiled in published research is positive with the exception of JMBA. Leave it to the most simple business concept of all - making juice from stuff that comes out of ground - to ruin what would have been a perfect record in 2013. Of course, the S&P is up near 30% this year. It is difficult to go wrong with that type of backdrop for decision making.
There has been individual analysis that has been faulty. AAPL certainly didn't go the way I expected. If it was left to my analysis the unimaginative investors who choose to have AAPL as part of their portfolio would have been looking at a $350 stock price.
I can't have ill will towards a company that is so widely held during the holiday season, however. Anything that allows for an increase in quality and quantity of gift giving because of the magic of the wealth effect can only be praised. It is a virtuous cycle of monetary delight...until it isn't.
What has been the most costly (back to my ill fated decision in Q1) was the dumping of MITL at near breakeven in the $3 range. I profiled MITL in a research report published January 14th. In the final paragraph of the report I said: A $6 stock price can very simply be attained by remaining consistent in their current efforts. Between $10-$12 will take place over the next 12-24 months on any perceived acceleration of their initiatives, which I believe will be the case.
Their initiatives did accelerate. I, however, have not been a part of it. It is the investment that would have made 2013 a great year instead of a good year. I enjoy great years. 2012 was a great year. 2013 has been good...borderline great. MITL was the missing component that would have taken it over that hump into clear greatness. All the components of a great year were in place, but I didn't execute on them properly.
Asset allocation is a tedious game. An investor literally makes 3 to 4 key decisions per year that can make or break performance. There is no science to the act of allocating properly to a particular asset class or individual equity. It is an art more than anything else.
I come up with anywhere between 6-10 new ideas per year. Balancing assets between those ideas based on how well they will perform is based on a ton of separate variables. Each time I have decided to liquidate or add to a position there have been a unique set of variables that have been key to the decision. It is impossible to determine with absolute certainty the quality of each decision that is made. All that can be done is to A) control risk and B) insure consistency in every action.
Inconsistency creates volatility in the variables. I don't know if that makes sense. Perhaps a better way to put is that inconsistency is the act of picking and choosing variables which eventually skew or curve fit results. The mark of an outstanding investment methodology can only be felt when it is applied uniformly, without bias. Consistency in every action creates excellence.
When it comes down it, I can't pinpoint why I chose to dump MITL, forfeiting a near 160% profit. I can also virtually guarantee that if I was put back in my chair at that exact time under the exact same circumstances, I would dump it again. There are simply certain things that I am not programmed to take advantage of with maximum efficiency. I suppose if I have discovered anything from missing MITL, this is it.
There...exorcism complete. Discovery made. I can rest now.
Thanks for walking with me during my internal process.
