Painful Opportunity Cost Lesson

More many years in the late 1990s and 2000s, AMC was a lemon of a business, destroying the value of shareholder value for long periods of time.

AMC had always been a strong generator of Free Cash Flow, but generations of managers with weak capital allocation discipline had resulted in the company's FCF being deployed on value-destroying investments and ventures.

So I never considered owning it.

About 8 or 9 years ago, something changed in the business; there was an overhaul of the board, and capital management disciplines were introduced.

The share price at the time was around $6.00/share.  I won't forget it.

I heard the message from the new management and I saw it started to happen in practice.  All the leading indicator evidence was there.

Yet I did not execute on my insights.  I did not buy shares in the company.

The reason was that I thought I'd tried to be cute; I thought I would try to finesse things by waiting for more evidence of the turnaround from "value destruction" to "value creation".

And then, once the runs actually started to be registered on the board, especially in terms of the quality of the acquisitions that AMC was undertaking, my thinking was,"Well, I never bought it at $6.00, so I can't possibly justify to my self to buy it at $7.50."   

And then when it reached $9.00, my thinking was "Well, I know this company is the real deal, but I'll rather wait until there is some or other crisis or issue in emerging markets which will cause the stick to sell off and that's when I will be able to buy."  

Well, I've been waiting for years for this great buying opportunity to present itself, and it never has.

All that has happened is that the company has - year after year - grown in Revenues, Earnings, Cash Flows and Dividends.

And now, listening to the webcast this morning, I am again struck by a management team that understand their business and their markets very well, but - even more importantly - know how to create shareholder value.

What a painful lesson this example of "trying to time the market" has been for me!