My Worst Investment Ever Podcast Atul Sethi – Remember to Write Things Down
BIO: Atul Sethi is the founder and managing partner of Farnam Tree, an investment advisor based in Bangkok, which is currently under pre-licensing.
STORY: Atul bought stock in a retail business, but the share price plummeted due to poor corporate governance. He kept holding onto the stock in the hopes that the price would go back to what he’d bought it. Instead, it kept going down, and he lost a sizeable amount from his investment.
LEARNING: Pay great attention to the people at the helm of the company you want to invest in. Don’t anchor to the purchase price.
“Don’t stay anchored to a stock’s purchase price.”
Atul Sethi
Guest profile
Atul Sethi is the founder and managing partner of Farnam Tree, an investment advisor based in Bangkok, which is currently under pre-licensing. After graduating from the University of Chicago, he spent 12 years at Credit Suisse in the Chicago, Singapore, and Bangkok offices. Atul started as a junior investment banker and later worked as a bank analyst in their Thailand Equity Research team. He left Credit Suisse this year and is now focused on Farnam Tree. Atul interned with Andrew in 2006.
Worst investment ever
Atul wanted to invest in the stock market, and his approach was to invest in a company with a substantial competitive advantage. He found a business in the retail industry that seemed like a good fit.
All the hard work crushing numbers, looking at the financial statements, and understanding the business model was made by Atul. But, his due diligence ignored some red flags on corporate governance. There was an insider trading issue involving one of the senior management members at the company. This issue, and other questionable decisions, are something that should have caught his eye, but he ignored them and went ahead and bought the stock.
Due to these issues, the stock price started going down. Atul made the mistake of holding onto the stock while waiting for the price to return to what he bought it. Unfortunately, the price kept going down, and he’d lost quite a sizeable amount by the time he decided to sell.
Lessons learned
- Pay great attention to the people leading the company you want to buy into.
- Don’t anchor to the purchase price. If you sense a continuous downturn in the stock, sell it as soon as possible and put that money in another business or investment.
Andrew’s takeaways
- Make sure you’re fully aware of any corporate governance issues and understand which ones you can overlook and which ones you can’t.
Actionable advice
Be objective when evaluating a stock. Write down all the reasons you like and don’t like the stock. Doing this will help you make a more accurate decision.
No. 1 goal for the next 12 months
Atul’s goal for the next 12 months is to get the company’s licensing and structure set up and hopefully present a solution for investing and managing portfolios in Thailand while addressing some of the problems he faced for most of the last decade in Thailand.
Parting words
“I hope more and more people get access to your podcast and learn from it.”
Atul Sethi
[spp-transcript]
Connect with Atul Sethi
Andrew’s books
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points
Connect with Andrew Stotz:
Further reading mentioned
- James Montier (January 2010), The Little Book of Behavioral Investing: How not to be your own worst enemy.