- If a stock is trading down, don’t let the market trick you into believing that something is necessarily wrong or that a vital piece of information is unknown to you. Trust your own work.
- Rationalizing an indiscriminate sell-off from a micro standpoint is senseless.
- Selling based on fear that the stock will fall further, without regard for valuation, is about the worst reason to sell a great business (it might feel good to be less invested in the short run, but over time you will regret everything you sell).
- Stay focused on looking for better ideas and better value. This is the best use of your time.
- Ignore the media; media sensationalizes everything. Turn off CNBC and ignore the day-to-day swings of the market.
- Maintain a steady hand in a difficult environment and remember that the decisions you make in times like these will determine your success or lack thereof for the next several years.
During difficult markets, it is paramount to focus on the long term. No one will ring the bell at the bottom. When fear turns to greed, it happens without warning and with such speed that you will miss out if you are not already there.
Based on our approach to investing and steadfast adherence to these principles, we believe that indiscriminate selling creates opportunities for the shrewd investor.
Patience and a steady hand are essential in volatile markets. Rest assured, we have both.
Before we buy a business, we arrive at a conservative estimate of its worth and then wait patiently until we can purchase shares at a big discount to the value established. As most stock market participants adopt a very short-term focus, negative headlines are typically accompanied by a knee-jerk reaction that drives prices down. When this happens, we move quickly to decipher the source and materiality of the news, determine any impact on our thesis and valuation and act accordingly.