Taking A Loss | When The Investment Case Changes

I have had this underperforming stock in my portfolio for the last three years and have been looking to get rid of it. At one point it was down almost 60% but has since clawed back some of those losses and I'm looking at a 35% loss.

This stock is a group of gynecology doctors that have banded their clinics together to form a chain and listed it on our local stock market. They helped to deliver my kids. I was very happy with the process and checked out their financial statements - every thing looked great!

Warren Buffett has been on the record to say that his 'favorite holding period is forever.' That said, he still ends up selling tons of shares every quarter. So what changed his mind? I was looking for some quotes on his decision process and here are two that really make sense:

1. When The Investment Case Changes

“We sell after we re-evaluating the economic characteristics of the business. We probably had one view of the long-term competitive advantage of the company at the time we’ve bought it, and we may have modified that.”

I had bought in under the assumption that they would use their excess cash to recruit more doctors and expand their clinics at home. They were also expanding into cancer treatment and I thought that would be a winner given our aging population.

Instead, some of their star doctors have taken an extended leave of absence and I realized how sensitive the earnings were to a few key earners. If a doctor were to drop out, it could be a potential loss of more than 20% revenue.

The final nail in the coffin for me when it came to the investment was their decision to invest in some mid-wives and post-delivery facility in our neighboring country. The company they partnered with has been loss making for years and never seen a profit.

I've seen this rodeo with GE and Alstom before. Cut!

2. Better Use of Capital Elsewhere

“We would sell if we needed money for something else, I would reluctantly sell something terribly cheap to buy something even cheaper"

The money that I can recoup from this can be better used elsewhere. Crypto presents way more opportunities and I'm looking to take advantage of this dip to load up on more crypto instead. 35% is a big percentage in stocks but as we know in crypto, 35% ain't nothing.

And so, i've finally got confirmation that my sell order got filled today and now it is time to deploy that capital in crypto. It's like a big burden has been lifted off my shoulders.