Long Tail Asset Management’s employees have considerable experience working in the markets – investing both our personal capital and capital on behalf of pooled investment funds and individual client accounts. There are three broad areas where mistakes have typically occurred:

• Poor Analysis;
• Value Traps; and
• Poor execution.

We judge the seriousness of the errors consistent with this order. 

Poor Analysis

Looking back at each investment in this group we placed too much weight on what management were telling us and the reported financial numbers without having sufficient industry understanding to truly independently verify what we were being told and foresee what was coming next. While we had at least some confirmation of the investment thesis evident in the financial accounts, we relied too heavily on these numbers without stepping back and looking at the situation from a broader perspective. The capital loss from these types of mistakes has generally been considerable – in reality, the nature of the business we owned was markedly different to our understanding.

Value Traps

In each of these investments we held a view that there was a compelling underlying investment thesis that the market was not recognising. However, there was no confirmation of this view in either the reported results or through the observable operations. The mistake is forming a mindset along the lines of … “the existing operations support the current share price and essentially we are getting a free option on our investment thesis”. Invariably we have ended up owning what was at best “dead money” or worse, a losing investment through not being focused on the lack of tangible confirmation of our investment thesis.

Poor Execution

The idea had been right but we executed it so poorly that we either did not make nearly what we should have or actually lost money.   

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We believe in providing transparency to our investors, and this extends to when we get it wrong; we will detail future mistakes in this section of the site.