Just a quick update. Last week, I mentioned Swank (SNKI) as an arbitrage play with limited downside and significant upside.
Well, the superior offer fell through, unfortunately. I sold my shares today for $9.90, ~ a 5% loss.
So here’s the question I’m sure a lot of you are going to be asking- should I have made the investment?
I think the answer is definitively yes.
Remember, it’s important to focus on process, not outcome.
I knew going in there was a decent chance of the superior proposal not going through and taking a small loss on the investment.
But I disagreed with the markets on the odds. The market was basically handicapping the chance of a superior proposal coming through as very, very small. I was willing to risk a small loss (5%) for a big gain (20%+) because I thought it was at least 50/50 that a better offer ended up happening, thus giving me a huge positive expectation.
So, if you disagree with my investment, or think it was a mistake- don’t focus on the outcome; instead, focus on my disagreement with the market. Did I miss something when I assigned the odds? Was there something that could’ve alerted me that a superior proposal wouldn’t come through?
If I made errors there, then I made a mistake in my investment.
If not, then the investment was sound, and luck wasn’t on my side this time.
But that’ll balance out over time, and provided I keep investing in situations w/ skewed risk rewards, my results will be excellent over the long run.
Disclosure- no longer long SNKI
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