Below is an excerpt from the March 2016 Press On Research issue to release exclusive to subscribers tomorrow March 15th. If you’d like to subscribe to Press On Research go to the links above or below.
What Do You Do When A Company You Own Drops In Price?
March 2016 Press On Research Issue
By Jason Rivera
Press On Research Volume 1 Issue 10
What do you do when a company you own stock in drops in price? What about when it drops a lot in price?
Do you panic and get anxious? Do you buy or sell more without doing any extra work? Do you ask your buddies what they think of the company even if they know nothing about investing?
If you do any of these things don’t worry as you’re not alone. This is how most investors react when something they own drops significantly in price.
But the goal of Value Investing Journey and Press On Research is not only to find the best investments possible to build long-term wealth. But also to teach so we can become better investors and thinkers.
And a major trait of any great long-term investor is the ability to control emotions.
If you can’t control your emotions it doesn’t matter what you invest in because you’ll always buy and sell at the wrong times. This is what most investors do.
Study after study shows most normal – average – investors buy at the height of stock prices and sell at the bottom of the price swing.
This is awful and is one reason most people don’t beat the market over time.
So how can you stop being an average investor?
There are several ways but today I want to talk about how to control emotions.
If you can’t control your emotions it doesn’t matter how great of an analyst you are you’ll still be a terrible investor.
In April 2015 I recommended what I thought was a great asset manager NAME REMOVED. Since then the stock price has dropped ~35% depending on what price you bought at. And I’ve gotten email from several readers asking for an update on the company.
Because of this today’s Press On Research isn’t a normal recommendation issue.
We’re going to reevaluate NAME REMOVED to see if I made a mistake in my analysis last year. And to show you the step by step process I take when reevaluating companies I own to take emotion out of my decision making processes.
I go on from here to reanalyze the company in full and show the step by step process I use so you can learn to do this yourself.
I found that while the company has dropped in absolute dollar terms and the economics have deteriorated a bit that the company is cheaper now than it was last April compared to its profits. And the business model and economics are still fantastic.
The company has an FCF/Sales of 40.3%. Pays a huge dividend. Is selling at only ~2 times its estimated 2015 full year profits. And is now selling below its book value by a significant margin.
I found nothing new that would destroy the investment thesis I laid out last April. And I was so happy after reevaluating the company that I recommend subscribers up their position in the company.
To find out what this great company is and to learn a valuable lesson on what you need to do when reevaluating a company you own subscribe to Press On Research.
And if you’re a Value Investing Journey subscriber remember you also get a 50% discount on a one year Press On Research subscription. Or you can join for only $49 to get tomorrow’s released issue and all back issues.
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