Today’s Article is inspired by this quote:
“I’d rather be generally correct, than exactly wrong..” -Warren Buffett
One critical mistake cost me $50K in upside on a freak occurrence today.
We didn’t’ lose money, but we didn’t make what we rightfully identified as value. Here’s the story…..
—
I was honest when I had the trading issue, and felt that I was ruining the fund.
I’ve fixed that. We’re good. And on the right path, now.
I now feel the opposite of negative. I’m now incredibly optimistic that I’m able to find, identify, and underwrite deals.
Said simply, I feel I’ve proven I can identify value.
What’s value if nobody realizes it? Well…. it is still value.
But what’s profit if nobody realizes it? Well… that is nothing.
In order to conver value to profit, you must have other peopel realize the secret you knew.
SO I knew a few secrets about DOCS 0.00%↑
The founders were best friends, the biz has 1M verified clinicians on it. I tried to get into the app, would not let me b/c I’m no Doctor.
It’s grown 10% every year for a decade, but guided last Q to only 4% growth.
I looked at everything closely, and said, “this 70% stock decline is not warranted.”
So I set my price targets…
Roughly like this..
My thesis was that it basically had no sellers left, and 17% of shares were Short.
The company is doing $200M of owners earnings, and has nearly $700M of netwroth in the biz.
Let’s assume these numbers are accurate, then by my rules I should have acquired $25K below that $21.16 number. And, it was trading there. So I did.
They reported earnings, and actually re-accelerated growth… from 4% to 7%.
Which would take their PEG from 2.5 to 1.4 if we didn’t update any of the earnings numbers.
The re-accerlation of growth, the stabalization of operating cash flows, and the AI narrative of them competing with Antropic and OpenEvidence on quiality led to a rally. Plus a 17% share short squeeze. It has now settled around 33% up. It probably stops around 20%. But wow. What a ride!
Not to mention, this stock got a sentiment re-rate, and now it probably settles on the high end of 15x not the prior high end of 10x. And that’s exactly what happened. So we just witnessed a true re-rate in real time of a value opportunity. From out of favor, to visible darling.
Eye-of-the-Tiger Investment Philosophy, Starting to Work
Simple. A tiger waits, and waits, until the moment is right, then it leaps.
I did all that.
I had the prey in my mouth, it played dead, then the second I loosened my bite it scurried off. Never to be seen again.
Damn.
But, we are getting so close to becoming extremely great at this. I’m knocking on the door.
Let’s keep pushing! No negativity. These are GREAT signs, I’m knocking on the door of companies I find in a dumpster that then make CNBC front page.
These are good signs of things to come!
And yes, I have the receipts to prove it :/… literally 2 minutes before the explosion.
I’m doing everything I can to rub my face in it to ensure I never forget this.
Just need to now bring this together into a more simplified system integrating the new working-capital rules we’ll deploy/hold by.
I’m seriously encouraged, another 2 weeks of heads down week/weekend work and I think I’m going to have a few of these in the portfolio. But that is NOT for me to decide, if I learned anything, you let the market bring things to you. You take what you’re given, you don’t take more, and as we saw today, you should not take less.
I repeat:
You take what you’re given, you don’t take more, and as we saw today, you should not take less.
~Don
p.s. if you’d like to watch a video of myself trying to break down what went wrong here…. enjoy via this LIVESTREAM LINK.
The real investment skill is being able to strike when the moment is right, and hold on for dear life.
