Mistakes

It's important to chronicle one's mistakes; it's humbling, humiliating and growth inducing.

People prefer talking about their winners, but it's the losers that one ought to worry about.

Luckily, position sizing helps with understanding the actual performance in a portfolio.

I bought Zylog Systems around the beginning of 2013. 

Of course, I have my original investment note citing a pure behavioural and Graham play.

There's a press release by the company saying nothing unusual is happening, and it is business as usual. This was when the share price was falling drastically, lower circuit after lower circuit.

" On the other hand the Promoters of the company have been buying and increasing their stake in the Company"

- Press Release.

I saw the balance sheet and said:

" Unless there is a fraud, I make money. " - this was at a share price of 73.

I did some background check on US visa applications, linkedin profiles, the canadian subsidiary (does it actually exist) and it did.

And then, there was some sort of a fraud; haven't been able to decipher what really happened. 

But, something wrong with receivables and the promoters used company money to buy shares in their own names.

So, there we go.

My hurry to invest and my disregard for potential fraudulent activity, caused me a few % points.

Lesson:

• Take it slow.
• Understand the downside
• Make sure you believe in the management
• Graham net-nets are quite a waste of time
• Spend more time on finding quality companies
• Understand the mistakes of others.

Mistakes of others:

• Dexter Shoes
• MTNL
• Cort Furniture
• Delta Financial
• US Air
• Berkshire Hathaway (original)
• General RE
• Renuka Sugar
• Bajaj Hindustan
• Suzlon

Lessons from Mistakes:

• Understand debt and debt covenants/ restrictions
• Understand industry changes
• Regulations have a tendency to kill companies
• Un-understandable liabilities are a pain to work with
• Can this business be seriously challenged?

I wrote this post after much deliberation, and based on the 2007 Berkshire letter where Buffett writes about his mistakes in "The good, the bad and the gruesome".