Buying and Selling Stocks – Long and Short
The short side gets a lot of media and makes a lot of noise but at the end of the day if you’re the world’s greatest short investor you only make a hundred percent. You can buy something 100 and say it’s worth zero and you made 100 on your money that’s it, whereas long investors they can make 10,000, 20,000, 30,000 percent over a period of 10 years if they’ve got the stock right and that’s how wealth is created so on.
The golden rules of money management is that you don’t want to be in a loser that’s going to blow up and if you’re a long-only money manager it’s very important for you as a money manager to not be invested in a stock where there is a it’s going to blow up because of governor’s reasons or it’s going to blow up because of improperly positioned business or you’re going to miss out on the inflection point of the business so yes you rode it while you wrote it up but suddenly the business has reached an inflection point and now it’s time to get out and you didn’t get out in time because the market doesn’t give you time to get out once the market knows what’s happening.
Long only managers have a real interest in finding out about governance issues, accounting issues, business inflection point because they make money by staying invested.
“It takes a great deal of nerve to cling to a short position in a stock in the face of an advancing market even though the stock may clearly be overvalued.” philip carret
“Short sellers are the market’s police officers. If short selling were to go away, the market would levitate even more than it currently does.” Seth Klarman
“If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century, you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get.” -Charlie Munger
“If you don’t know who you are, this is an expensive place to find out.” -Adam Smith (pseudonym for George Goodman),
Accounting matter the most:
Accounting matters but it matters more to people who are non-accountants than to the accountants because what happens in financial statements is accountants go through a certain type of training and then they are start to actually implement that training in the process of either preparing those financial statements auditing those financial statements or understanding those financial statements so many times they lack of perspective which is critical that this does not make sense even if your accounting says it’s okay from a business standpoint this does not add up and therefore that’s where a lot of differential value add comes in when other people read the financial statements and they think oh this make sense and somebody else who does not agree with the accounting standards itself say well this does not make any sense.