full steam ahead, page-17

I have some very mixed feelings about Blackmores.

Having owned this company since the late 1990s (first shares acquired in 1997, to be precise) and having continued to buy shares right through the 2000's, I sold my entire holdings about three years ago.

It was a highly profitable association spanning a full 15 years, during which time I once calculated the compound annual return (even excluding dividends) was around 15%pa or 16%pa.

And 15%-16% growth per year over 15 years is a lot of value creation.

The reason for my selling was that I saw the competitive landscape intensifying, with the results starting to impact BKL's margins. What I failed to appreciate was how successful the company would be in establishing new offshore markets as quickly as they have done.

Ordinarily I don't like selling good quality businesses (for the very reason that they are likely to continue increasing in intrinsic value which you miss out on if you sell...AND then you have the added insult of a Capital Gains Tax liability) but sometimes something structural or fundamental about a stock changes which, when it happens, good investment process discipline says you should sell.

This is what I thought was the case with Blackmores.

But I was clearly wrong.

While I have clearly left a lot of value on the table (and had to pay a somewhat large Capital Gains Tax bill), I think one needs to be philosophical about these sorts of "foregone-upside" situations.

You are never going to bat 100% every time in the stock investing game, but I am increasingly convinced that it is not missing out on the multi-baggers that prevents wealth creation, but it is the getting caught by the ones that result in significant permanent destruction of value.


A bit like in the case of national lotteries, "share performance envy" is a dangerous psychological phenomenon that invariably causes investors to do things that are far too risky.


Of course