Today I pulled out the last of my carrots from the ground, the seeds of which had been laid last fall when the days had begun to look grim. The evenings were coming in and the nights were getting overwhelming. This was an experiment of sorts. I had read that carrots can survive through winter and still be harvested in spring as long as you don’t let the ground freeze. As improbable as it might sound, the carrots did come through and not only survived but thrived in the warmth of the spring to give a full harvest.
Like anything else in life, investing, much like gardening, requires a great deal of patience, determination and self confidence. As is the case with sowing, your initial investment comes with a lot of excitement. There is hope and optimism about the choice made and a high level of conviction. Then comes the dark clouds and the dreary looking winter days or the blaze of the summer sun. The investment starts looking rather wilted and improbable. The whole venture is now under question as things get tougher. It does not help that a whole bunch of people will tell you that you are crazy to hold on to the thesis. At some point the agony becomes unbearable and it becomes impossible to look at what you have gotten yourself into. At the height of self doubt is the temptation to give up and end the pain.
A year back, I was having a discussion with a friend of mine regarding one of my rather perilous investment thesis that is Arcelor Mittal(MT). As I walked through my thesis once again, he asked a very pertinent question. Why hold on to an investment that is in dire straits when you could be investing in any number of other options. It is a valid question when your investment is down nearly 50% and you are staring down a 35% dilution with no end in sight. I could have been in almost any other stock and done better, goes the argument. And while that is a fairly accurate statement, the question is how would I pick that alternate investment to avoid this debacle.
The only conclusion I have come up with is that much like gardening, you have to pick your seeds based on what you see in terms of good value and sow them. The journey of the investment from seed to fruit will inevitably be strewn with challenges and perils. At the end of the day you can only conduct your duties as a good farmer and care for the investment as best you know and wait for the fruit to come. Sometime it comes at the turn of spring and sometimes it takes a few years for the roots to take hold and finally flower. But at least you know what you have invested in over the years and have some understanding of how strong the roots are.
All this requires a great deal of self-confidence and a willingness to be wrong and learn from it. The market will certainly hand you lemons once in awhile. But the confidence to hold on for better days can only come from the underlying thesis and a belief that you will be right more times than not.