The Munger Approach To Selling Stocks & Marriage

During their latest episode of the VALUE: After Hours Podcast, Taylor, and Carlisle discussed The Munger Approach To Selling Stocks & Marriage. Here’s an excerpt from the episode:

Tobias: Implicit in what you just said. There’s the distinction between buying and selling, right? So, you buy, and you’re looking for everything to be lined up perfectly correctly, and then holding is a different question. You’re like, “Now, how close are we getting to my imagination?”

Jake: Yeah. I agree with Munger at when he was, I think, 1997, when he said, “I’m still figuring out my sell criteria.”

Tobias: [laughs]

Jake: I think his words on marriage actually apply reasonably well to this, which is, when you go into the marriage, you should have your eyes wide open. But once you’re in it, you should have your eyes, a little bit closed.

Tobias: [laughs]

Jake: I think that same could be true for your portfolio, where have your eyes wide open on valuation. But as you own it over time, I think being too strict with valuation sometimes can make you sell too early and then what, especially, if you don’t have anything readily to put into it at that point. Or, said another way, I think being a value buyer and a bit of a growth holder might be a reasonable thing to do.

Tobias: I say quality holder.

Jake: Quality. Yeah, sure.

Tobias: But also, obviously, you can’t ignore the valuation either. You can’t have it.

Jake: No, but I think maybe forcing it to an extreme– Having your bar a little bit higher up like, I would never buy here, but I can hold here for a while. Maybe it grows into that. Maybe it doesn’t. I’ve been guilty in the past, certainly of punching out of something too soon and not when you get a win earlier, and then you leave a lot of money on the table, potentially. Especially, if it’s to just go into cash and you don’t have anything readily available to put it into, that seems super.

Tobias: Yeah. I had some holdings last year in the home builders and a lot of adjacent stuff like Williams Sonoma, which I continue to hold, like, that kind of stuff. Boise Cascade, which I also continue to hold. It’s all adjacent or not a builder, but it’s selling into that same market. As it’s run up, there’s no discretionary element to me selling some of these things. There has to better opportunities in there. But I don’t know. At any given, you shake the opportunity set every time you rebalance.

Jake: Right.

Tobias: I always hope for those things that something else comes in and pushes them out, because– [crosstalk]

Jake: It feels like you already kind of rung that the– [crosstalk]

Tobias: So, my discretionary– [crosstalk]

Jake: Squeeze that lemon.

Tobias: They’re good businesses. They’re pretty good businesses, but they’re not great businesses and they’re definitely cyclical.

Jake: Yeah.

Tobias: It feels to me [laughs] close to the end of that cycle. I really want to get out, but they’re still in there. So, I just keep on holding.

Jake: Yeah, it still must be reasonably priced if they’re still in there, right?

Tobias: It’s been good fortune for me that I haven’t, because they’ve continued to work, even though I just, like, along with everybody else, was just completely shocked that they continued to do that.

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