At TEAM knowing when and what to sell is probably our most important investment decision, debate, analysis, discipline, concern and practice. Investing at a cheap price can mean absolutely nothing if we don’t sell when we should. Selling at a loss is the most difficult decision we all have to make. It is all too easy to ignore paper losses and pay more attention to your profits. Wrong way. Telescope through the wrong end.
At TEAM we are advocates of the great Philip Fisher and his maxim, “If the job has been correctly done when a common stock is purchased, the time to sell it is — almost never." That's why we at TEAM target at least a three to five year holding periods for each of our investments.
Fisher started managing client money in 1931 and over the next seven decade made tremendous profits for his clients. Must read is his “Common Stocks and Uncommon Profits”.
Like Fisher TEAM look to invest for the long term in a concentrated portfolio of outstanding companies with compelling growth prospects that we can understand extremely well. TEAM lets its winners run. We are investors not traders.
Neither greed nor fear are constructive in a disciplined investment approach. Both lead to impulsive and potentially costly decisions. At TEAM we trust in our technical and experienced assessment over human bias. Emotion and psychology get in the way of good decisions. TEAM looks to stick to the evidence and data, not how we feel.
“TEAM try to minimize human bias”
Technical indicators are important in investment decision making. At TEAM we do not have a particular favorite or particularly emphasize one type or category such as style. Our investments are both value and growth in our assessment. “Price is what you pay. Value is what you get”, Warren Buffett.
“At TEAM we invest based on multiple technical indicators”
Investors need to respect the market and sometimes accept losses. Being stubborn when you are losing can lead to greater losses. An investment may be successful one day and may not the next. Investing at TEAM is an “always on” activity. It is “90% perspiration and 10% inspiration”. At TEAM we look to be rational in our decision making. We look to guard against overconfidence. Having a team with different ages, experiences and technical capabilities is a massive help.
“At TEAM we always respect the market”
At TEAM we look to learn from mistakes, ours and others. It is dangerous to stay stuck in a particular way of thinking. The world changes. At TEAM we work on having an excellent understanding of the companies and their industries or markets we invest in. We also work extremely hard on having a good understanding of economic and technical concepts.
“At TEAM we learn, learn, learn”
The markets and the investment case for a company can change direction anytime based on a piece of news in the middle of a trading day. At TEAM we wake early and are always scanning newspapers, company announcements, research reports, trade press, mobile apps and tv news channels. To help us we have AlpaSense.
AlphaSense, a US based technology platform service is powered by AI utilizing the advances that have been made in natural language processing and machine learning. It is a revolutionary search engine that helps TEAM work smarter. We are the first users in Jersey and an early adopter in the broader Investment Management industry.
“At TEAM we stay up to date…. always.”
Why do we sell?
Reason 1: Better Opportunities
Sometimes there's nothing wrong at all with a company or its stock, there are simply better opportunities and at TEAM we keep portfolios tight or concentrated. No more than 35 positions.
At TEAM we will consider selling a less attractive stock (even at a loss) if we think there is a better opportunity elsewhere.
Reason 2: Businesses/industry Change
We cannot avoid the fact that businesses and industries change — sometimes significantly. It could be a major acquisition, a change in management, or a change in the competitive landscape or technology or unforeseen event such as a pandemic. When this occurs, TEAM analyze the new information and reevaluate to see if the reasons we invested in the company remain valid.
We will consider selling if:
- The company's ability to generate equivalent profitsare compromised.
- Management undergoes significant changes or makes questionable decisions.
- A new competitive threat, such as technology emerges or competitors perform better than expected.
TEAM also take into account unfavorable developments in a company's industry. Our AI and machine learning tool, AlpaSense is a department of analysts.
We look to differentiate between temporary and permanent changes. In a downturn, such as recently, financial figures may suffer even for the best-run companies. What's important is how these businesses take advantage of the effects on their industry to improve their competitive position.
Reason 3: Valuation
At TEAM we are long term investors, but sometimes the market displays “irrational exuberance”. It can get way ahead of itself. TEAM will consider selling if a stock price has run up to a point where it no longer reflects the underlying value of the business.
Reason 4: Wrong Investment Thesis
Everyone makes mistakes. Sometimes, we just simply miss something. At TEAM if it turns out our rationale for buying the stock was flawed, if our valuation was too optimistic, or we underestimated the risks, we sell as soon as we recognize the error of our assessment or judgement. Even if it is a loss. The loss could get bigger. We never look to the market to save us.
Reason 5: We are losing sleep
You cannot value peace of mind. At TEAM we do not like to lose sleep, and if we do it is time to consider selling and investing elsewhere. We are looking to invest profitably over the long term not to cause ourselves or our clients to develop ulcers. Also, stressing about an investment can cause a loss of focus leading to rash decisions elsewhere in your investment portfolio. TEAM tries to stick within our comfort, knowledge, experience and technical ability zones.
Investment has no place for conceit, ego or laziness. Over the years the markets will rise and fall, and sometimes violently. Recessions come and go as do booms. At TEAM we focus on long term investing. “Time in the market beats market timing”.
Fear should not be a reason to sell.