Testing Your Theory

Hi Everyone,


It’s critical to constantly test and re analyze your ideas to see if A) you are wrong or in a better case, no longer right, or B) things have changed, to break your investment thesis.


We continually critically examine our ideas and when necessary change.  Often times we do not get the results we want immediately with a company and have to critically examine our thesis, if we are still right, we keep it and continue the wait.  Two great examples of the wait paying off are Bank of America and Twilio. Bank of America took 4 years, Twilio 18 months – mostly underwater.  In both cases the companies did exactly what we wanted and our discipline paid off.


When training Rebecca, I have gone through  a lot of why we invested in certain spaces and sectors, and critically examined some of our previous investment ideas that aren’t performing well this year, and have found my resolve even more intact.


A couple Stocks having a tough year are Facebook, Alibiba, and Tencent.


These three examples from top to bottom are down – 26%, 35% and 25%.  Its very normal for these large firms to come across hard times in the stock price and changes in market sentiment, but one must also look at the results they deliver and will continue to deliver going forward, in that case, all these companies look really good.

It’s always a bumpy ride, think back to 2006 – Apple dropped by 41% that year top to bottom and those who were shaken off the puck missed another 10 bagger return over the next decade.

The ride is never completely smooth, headline risk exists and investors can easily get spooked on small thoughts missing the big picture of a companies potential.  We think the big picture for these companies remains very strong.