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Over the last three years I have kept a record of trade decisions - and importantly that also includes decisions to not buy or take any further action. I have been reviewing these decisions over the last few weeks looking for areas of improvement. 

This is quite confronting, and to be frank down right embarrassing on occasion. But this feedback has been highly informative and most definitely worth the effort. So much so, I have incorporated in to my weekly list of things to do a quick review of some previous decisions. It feels a bit like going over video replay a few times before going out and swinging at the ball. 

I have listed some of my observations below. There are plenty of other observations - enough to write a small book probably. None of these are necessarily new, but I thought you might find them interesting anyway.  

• Be careful of writing off a situation because it looks superficially expensive. Funnily enough, this has been one of the main reasons for not getting more big winners (i.e. multi baggers). If something is growing quickly and is now getting the full benefit of operational leverage, a high PE stock can rapidly become a low PE stock. Key point - do more digging before concluding a stock is 'expensive'. MFG is a perfect example. 
• Be careful of getting too excited because it looks cheap.  It's amazing to see just how many value traps are out there - far more than you think. Usually a stock is cheap for a good reason and sometimes it takes a while to uncover why. The irony is cheap stocks are often dangerous - at least in terms of getting caught in a long term value trap.
• Big winners almost always have 'winner' people somewhere in the mix. This might be at management level and/or shareholder level. Jim Collins makes a compelling argument for quality management in Good to Great and after reviewing my decisions it is hard to disagree. Usually the biggest asset or liability on the balance sheet is not shown - the quality of management. What I would also add is there are plenty of times where management may not be great but good shareholders can get in and shake things up. Whether good people are involved from the inside or outside, I can't really think of examples where a stock has moved up multiple times where an A-Grader isn't involved somewhere. 
• Finding an interesting situation, getting bored, forgetting about it and moving onto the next latest-and-greatest. Often, a company may not be ready for buying when you discover it. I decided not to buy AAPL around the lows at $64 in 2013 on not unreasonable grounds (was incredibly cheap but quarterly earnings weren't going the right way). I moved on and forgot about it looking for something more complicated. Carl Icahn bought a few months later and the stock doubled over the next two years - an unbelievable trade given the size, value, quality of AAPL and green light given by one of the smartest smart-money men around. If I kept an eye on the situation, buying when Icahn announced and started pushing for a buy-back was an easy trade. Key point - keep an eye on interesting situations, even if it means being across less stocks. 
• Price volatility. This one cuts both ways. It's easy to get scared by prices falling. It's also easy to get put off by a price that has increased recently. Stocks that are turning around or are reaching an inflection point and moving into profitability may have moved up 50-100% and still be an incredible opportunity as there still might be multiple lots of upside to be had. However the cheapskate in me finds it tough to buy a stock that has already moved a lot. Price volatility also really depends on the trade. A bombed asset play will inherently have an upper bound in terms of value and quite often will never reach fair value. So buying one of these after a price run is usually not brilliant - unless there is still a very long way to go to NTA. 

Kristian