Crisis of Patience and Confidence

By Travis Johnson, Stock Gumshoe, April 28, 2009

Well, once again I’ve been bitten in the nether regions by a lack of patience and confidence in my own research. Arg.

I had owned shares of ABB Grain for a couple years, believing it to be undervalued largely because of depressed revenue that came with the worst of the drought in Australia, and I liked their expansion and their distribution network that allowed them to serve agribusiness of all types in Australia, and the big and steady business from brewers for their malted barley (the biggest part of their business).

But dry conditions persisted in many areas, they didn’t perform quite as well as I was hoping, and they got beaten down with the collapsing interest in agriculture investments. I continued to think that they were undervalued, but with market conditions so tough I questioned that assumption and decided I should sell my shares.

That was probably a mistake — as evidenced by the fact that Viterra, a similar company in Canada that runs a grain network (distribution of supplies and collection and marketing of grains), has apparently made a nice premium offer for the shares. Not sure what will happen yet, but it’s another reminder to me that my tendency to be patient and stubborn about holding shares isn’t necessarily always wrong — in part because sometimes I can be my own worst enemy, selling at the worst possible time.

That’s not an uncommon trait among individual investors, unfortunately, but the more we recognize our faults the more we can grow to understand our own decision-making and empower ourselves to think twice (or three or four times) before making investment choices — if you’re trading stocks based on charts or technical indicators, clearly you need to follow those indicators and move as quickly as your system requires, and if you use portfolio-protecting stop losses you need to consistently honor those … but if you’re investing for the very long term based on a company’s fundamental growth and performance, don’t necessarily give up on the prospects just because the stock doesn’t perform as you expect in a given period of time.

It may or may not have really been a mistake for me to sell my shares of ABB Grain, in retrospect (they could have as easily levered up to acquire a local competitor and seen their shares fall further, the offer from Viterra came as ...

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