Some Thoughts on Behavior

I am, by nature, an unemotional individual (I’ve had people tell me I’ll never get married, or that if I do, it will be for convenience and not love).  Day-to-day, I have less mood swings than most people I know, and very rarely do I have those “bad days” that everyone talks about.  It’s all pretty much the same to me.

What I’ve seen though, after an investment in a company, my behavior will change.  I will naturally think about that business a lot more after my purchase than before.  Any shreds of doubt I may have had before become major concerns once I am a business owner.  This forces me to read & dig much further into the company I own.  That trust preferred security I didn’t know the details on or the rights offering that occurred six years ago suddenly become more important than eating or sleeping.

The true eye-opener is when I need to check the stock price more than once or twice a week.  Why would I need to know how much my farm is worth on a daily basis?  Well, the answer would be that I don’t really know everything about the farm.  Perhaps there is that fence around the pasture I didn’t inspect too closely, or I forgot to look at historical weather patterns in my region.  Whatever the reason, my mind is not at ease.

It is in these situations in which I know I didn’t complete my work.  During my research, I missed something and I can’t allow it to slip my mind until I have the facts straight. It is only once I have dug up all the facts that my mind is back at ease.

I would recommend doing your research and writing all your thoughts down in an article before making any purchases.  It will force you to get your views of the company fully straight.  This is the great thing about my blog- not only can I share my ideas with the world, I can also help get my thinking straight.

Today I re-sized a position in my portfolio. I am new to the insurance industry and I had initially placed a 20% investment into Hallmark Financial.  This investment was well-researched and I have no worries about the company’s future.  However, I did have some concerns regarding the size of the holding.  I could have easily missed something, either with the company or the industry at large.  I just started learning about insurance two weeks ago and I am by no means an expert.  This position was something on my mind since the day I purchased my stake.  After my position re-sizing (down from 20% to 14%), my mind has been at ease.  It seems my subconscious knows when I’ve become too greedy or when I’ve rushed into something before I know enough about it.

This “need” to check stock prices could be considered a warning sign of speculation.  If you cannot survive without checking the stock price regularly, your method must be flawed.  You are depending on someone else’s opinion (Mr. Market), rather than your own, to determine whether you’ve made a good investment.

You know what they say, a contract can’t be un-signed, so make sure to think before you act.

I’m curious whether I’m alone here- has this happened to you before, with either the business or the size of the holding? Have there been times when you needed to check the price of any particular holdings regularly to ease your concerns?


About Andrew Schneck

I am a value investor focused on misunderstood securities and industries, with an eye for long-term stock ownership.
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4 Responses to Some Thoughts on Behavior

  1. Parth says:

    I think its normal to do that. You just get the feeling of wanting to know how its doing because you have money in it. Nothing wrong with checking prices but I guess its a problem when you want to buy or sell based on the market rather than making a rational decision. Once in a while I even check stocks I used to own just to see how they are doing.

  2. schn1eck7 says:

    There is a difference between checking prices at your leisure and checking regularly because you have a bad feeling about a holding. I would say what you’re describing is a healthy amount; there are times it becomes excessive and it is those situations that I am addressing.

  3. Albie says:

    How do you size your positions Andrew ?
    How big a decision is it in your investment process?

  4. schn1eck7 says:

    It is not, by any means, a scientific process. I think long and hard about the business I will be an owner of and gather my thoughts on the company. It all is based on my thoughts for downside risk. If it looks like I could triple my money but has a good chance of failing, I wouldn’t put more than 2% or so in. If there was a very good chance of me making 60-80% over a year or two, with almost no chance of losing money, I’d put in 20% or so. It’s more about downside safety than it is about the upside.

    It is not a big part of my investment process… once I’ve read everything about the business, I already have a good idea of how large my stake should be.

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