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David Abbott's  Instablog

22 years on the buy side, fixed income and then equities.
  • Lost Thesis Should Yield Action - Common Sense Investing Rule (CSIR)#1
    As an Equity Portfolio manager I have had several occasions where I have lost faith in my thesis on a stock and I have done nothing about it. Most times I have regretted my inaction.
     
    A case in point is Zimmer (ZMH), a stock I have owned for several years and had come to the realization last September that I had lost my thesis of why I had bought the company in the first place.
    1.  Came to believe that "big ticket" health care expenses will be some of the first areas hit with Obama's health initiatives
    2.  Became suspect of management quality in dealing with DOJ and Surgeons
    3.  Began questioning new product innovation strength
     
    Here is a classic case of knowingly losing faith in a thesis not acting upon it.
    1 Year Return:
    ZMH = -31.0%
    S&P 500 = -20.6%
    S&P Health Care Index = -13.6%
     
    This is Common Sense Investing Rule (CSIR) # 1
     
    1. If you have lost faith in your thesis for a stock you should act upon it.

    Disclosure:  No longer own ZMH
    Tags: ZMH, Health
    Sep 04 03:11 pm | Link | Comment!
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