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The Long Game

May 16, 2022

Last year, Major League Baseball celebrated the 20,000th player to appear in a game over 150 years of the sport. Reaching this level is an extraordinary achievement. As a batter, if you can manage to hit the ball one out of every four times at bat, you have a batting average of .250. This achievement can land you a multimillion-dollar contract. If you can hit one out of every three times at bat, that average is now .333. Only 31 players in the history of baseball have ever achieved this – an automatic ticket to the Baseball Hall of Fame! Investing is not dissimilar – it takes a lot of discipline, focus, and a long-term commitment to your strategy.

A baseball game lasts only nine innings, but the time we spend as investors can last years, decades, or even generations. As a long-term investor, you must resist the urge to swing for the fences, find your sweet spot, and let the ball come to you. Over time, you are happy to hit some singles, a few doubles, and occasionally get a home run, while realizing that strikeouts are sometimes part of the game. I have learned many lessons over the years that help me manage the curveballs and knuckleballs constantly coming at us in the market. Here are two personal reflections on times I learned an important lesson.

The first valuable lesson I learned was during 2007 – 2008, during the Great Recession. I was working on Wall Street and had, over time, amassed a lot of exposure to my firm’s stock. In January of 2007, the stock was trading at $97.00. By September of 2008, the subprime market had imploded, and the stock was now at $16.00. The discussions around our trading desk were painful reminders of the importance of diversification during a very turbulent market.

The second lesson came more recently. Over the last couple of years, lockdowns forced many people to stay and work from their homes. After much research, I decided to stick my toe in a couple of ‘darling’ stocks that were a part of that COVID world of companies that worked well when people stayed home. But that world ended, and a post COVID world returned. The darlings were no longer darlings. I sold both, took my loss, and went to the dugout to reflect. It is okay to try something new if your approach is measured, and it fits within your long-term strategy. But, it is also important to act when something isn’t working, and sometimes your best loss might be an early exit.

It can be challenging, but I continue to suit up for the market daily. I try to apply what I have learned over the years and to understand the risk I am willing to take. With a proper game plan in place, I feel that each new lesson prepares me to better face the ever-changing world of opportunities the market throws me.

Carl Gambrell