GTAT - GT Advanced Technologies

[PatientCheetah]

I don't feel terrible. I am sure if you are in the market long enough, you will have a few stocks surprise hugely to the downside. For this reason, I never put more than 20% of my assets into one idea.

[nodnub]

Definitely sad.

 

I will say this about GTAT though.  No one expected a bankruptcy and the stock going from 12 to zero in a single day.  How many of us at one point put the majority of our net worth in one position?  I have done it myself many times.  Whether we like it or not, as concentrated value investors there is a non-zero chance of something like this happening to any of us.  Those who say "it will never happen to XYZ or ABC" do not realize what non-zero means. 

 

It should be a humbling experience for anyone investing for themselves or professionally.

 

I hope that not many people here have invested the majority of their net worth on a single company with no margin of safety, which relies on a single customer contract in a new line of business. Putting the majority of net worth on the line is a serious wager. Save that for the high conviction ideas. I can't see how anyone thought GTAT had any safety in its competitive position.  It was a story stock, a speculation.  It doesn't matter that no one expected bankruptcy! This is a perfect example of why you don't concentrate heavily in something with no margin of safety.

 

--

I do feel bad that they guy lost a lot of money, but it's a lesson he obviously needed to learn.

[beerbaron]

I suggest anybody that put all of their money on a single stock one time to take a look at the Kelly formula. It's going to help on portfolio sizing.

 

BeerBaron

[Hielko]

I suggest anybody that put all of their money on a single stock one time to take a look at the Kelly formula. It's going to help on portfolio sizing.

 

BeerBaron

Not really. If you size according to the Kelly criteria you are often betting very big. Easy to get a 50%+ allocation for a single stock if you are a bit optimistic about the possible upside.

[beerbaron]

I suggest anybody that put all of their money on a single stock one time to take a look at the Kelly formula. It's going to help on portfolio sizing.

 

BeerBaron

Not really. If you size according to the Kelly criteria you are often betting very big. Easy to get a 50%+ allocation for a single stock if you are a bit optimistic about the possible upside.

 

Yes but Kelly will never let you be 100% invested.

[tombgrt]

I believe some people use Kelly divided by 2. So you only take half a Kelly. There was a good discussion about this a few years ago.

[peter1234]

Definitely sad.

 

I will say this about GTAT though.  No one expected a bankruptcy and the stock going from 12 to zero in a single day.  How many of us at one point put the majority of our net worth in one position?  I have done it myself many times.  Whether we like it or not, as concentrated value investors there is a non-zero chance of something like this happening to any of us.  Those who say "it will never happen to XYZ or ABC" do not realize what non-zero means. 

 

It should be a humbling experience for anyone investing for themselves or professionally.

 

I hope that not many people here have invested the majority of their net worth on a single company with no margin of safety, which relies on a single customer contract in a new line of business. Putting the majority of net worth on the line is a serious wager. Save that for the high conviction ideas. I can't see how anyone thought GTAT had any safety in its competitive position.  It was a story stock, a speculation.  It doesn't matter that no one expected bankruptcy! This is a perfect example of why you don't concentrate heavily in something with no margin of safety.

 

--

I do feel bad that they guy lost a lot of money, but it's a lesson he obviously needed to learn.

 

In addition, it was a huge bet on a new line of business as they were making furnaces, not glass before.