The Black Box

[wahz]

There will be more later, but:

1. you have to have exhaustively studied the company and be as certain as you are that the sun rises in the am that you are getting a good price on a great company or a great price on a good company, or a give away price on an average company

2. You have to have a back up plan in case you are wrong, which will happen because you can't be certain. This could mean stops in place before the buy is even made, or another "out" as I have done with neng, which was to have much more money coming in order to dwarf the position later and turn it into a long term hold. Even in that case, you may sell at a loss if the fundamental situation has deteriorated.

You must never ever ever position yourself to take a nuclear hit. You must never postion yourself to lose so much that you can't reasonably get back to where you were before the mistake.