Mental Models discussed in this podcast:
- Zero Based Thinking
- Resulting
- Check out Annie Duke’s book “Thinking in Bets” to learn more
- Skin in the Game
- Check out Nassim Taleb’s book “Skin in the Game” to learn more
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You can find out more information by listening to episode 11 of this podcast.
GameStop Stock Investment Post-mortem – Show Outline
The full show notes for this episode are available at https://www.diyinvesting.org/Episode30
If you’d like to read a full written version of this podcast, check out the written version here.
Initial Buy Thesis
- Dividend yield exceeds 10%
- Dividend is sustainable
- Check out Episode 5 of the podcast to learn more
Investment Results
- Loss of 50-55% of the principal invested in GameStop stock
Investment Process
- Was my Buy Thesis correct?
- Root Cause of my Investment mistakes
- Was my Sell Thesis correct?
- I did not sell solely because the dividend was eliminated
- Free cash flow from declining businesses ought to be distributed to shareholders
Conclusion
- My bad process led to bad results in this case
- Could have been better or worse
Lessons Learned
Investment Rules
- Never buy a retail company with declining revenue
- Never buy a physical retail company with debt on its balance sheet (If they lease their locations)
- Do not hold onto a stock once you know your investment thesis is wrong
- Prioritize investing in companies where management has skin in the game
Red Flags
- A combination of large stock price declines without insider buying or stock buybacks
- Non-investors you talk to think the company will be a bad investment
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