Speedwell Research

As Munger says: "One of the best ways to learn from mistakes is to learn from the mistakes of others"

If you do make a mistake, hopefully you have the flexibility of mind to catch it early.

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4) Be open minded and change your opinion as the facts change.

Had he kept his full position in Bombardier,

he would have watched a single postion become more than half of his portfolio to only then be decimated to just a ~10% postion (down 80%).

(10/x)

2) Whether a decision is smart or not may take years to become totally clear.

3) Things can always go up more, but that should not be an investment consideration.

(9/x)

Key takeaways:

1) Bombardier selling may have been a good decision,
but buying it in the first place may have been wrong.

The business proved to perform poorly in a recession.

If it hadn't happened to be over or fully valued at the time, he would have likely held.

(8/x)

He watched a stock he sold go up 10x before ultimately being proven correct about competition.

Again, this was a long sega where the intelligence of his decison was unclear for years.

He quotes Fisher: "It is easier to know WHAT will happen than WHEN it will happen"

(7/x)

He juxtaposed this to Sun Microsystems, which was even more extreme.

He owned the stock at 5x earnings.

Then sold at a gain because of competition fears in 1997.

It traded at 100x earnings before crashing below his orginal acquistion price years earlier.

(6/x)

This whole sega was a 5 year ordeal.

He felt smart for making the investment.

Stupid for selling early.

Then vindicated for heavily trimming.

To ultimately be wrong for a different reason-- the quality of the business was low if it couldn't withstand a recession

(5/x)

A recession came in 2002 and the stock was cut 80%

It wasn't just valuation that was hit;

weakness in the business model was exposed as well.

(4/x)

Then shares the went up 300%...

When writing a post-mortem in 1999 (two years after he sold), he thought he made a mistake with one caveat:

until there was a recession, he would not admit he was wrong to sell.

(3/x)

In 1997, Bombardier made up 20% of his portfolio, and he cut it down 90%.

At the time he thought the valuation was high, future prospects were worse, and a key manager left.

(2/x)

François Rochon is a well known investment manager who has compounded at ~15% annualized for 30 years (!)

In 2002 though he was much more obscure.
A single stock was 20% of his portfolio.

Below he shares his thoughts on selling and other mistakes.

(1/x)

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