One of the toughest (from a psychological perspective) companies I've ever owned is Best Buy. Until recently, that is: the shares are up 250% year to date. While the ending is happy (I'm now out of it), the journey had more than its share of downs, for several reasons.
When the stock was getting hammered, the media loved to hate the company. Perhaps because Best Buy is a large cap, the negative headlines were almost daily for a while there. Some of you piled on, sending me messages about how there's no room for such retailers in today's world.
Though I'm a contrarian, I have to admit that the negativity did take its toll. I started to question my logic. Luckily, I stuck with it, as per this post from last year. A major reason I was able to stick to my convictions was that I felt that I had seen this movie before; during the tech bubble, any struggling bricks and mortar was considered to be on the verge of bankruptcy.
Indeed, the media coverage of Best Buy kind of reminded me of what articles were like in 1999. A quick Google search reveals a ton of articles from 2012 discussing Best Buy's impending bankruptcy, even though the company was free cash flow positive on the order a few hundred million dollars. (Interestingly, there appear to be practically no 2013 articles about Best Buy's bankruptcy, even though the company has hardly changed!)
We normally think of operating results driving sentiment, but in some cases there appears to be some reflexivity, in that sentiment can have an effect on a company's operations. Luckily for me, Best Buy being a mostly transactional business, I'm not sure that happened here. (I don't think I would say the same for Blackberry, where media negativity has likely caused some customers to switch to competitors.)
So what's the lesson here? I don't think it's to stick to your convictions, because I very easily could have been wrong here, as I have been in many other cases. I think the lesson is to recognize how difficult it is to predict the future. As such, one should buy cheap, so that one is always well-compensated for taking these risks.
Disclosure: No position