One of the biggest changes I’ve made over the last year has nothing to do with what I’m buying. It has to do with how I’m investing.
For years I actively managed virtually all of my own money. I was constantly researching companies, reading filings, listening to conference calls, building positions, trimming them, hedging them, and occasionally making trades I probably didn’t need to make. I’m trying to move away from that.
I increasingly believe the constant need to “do something” is often the enemy of good investing. The market rewards patience far more often than activity, and I’m trying to build a life where I’m spending more time writing ideas and actually living instead of staring at Level II quotes, the market equivalent of a slot machine, all day.
As a result, I’ve started letting a combination of human advisors and digital advisors manage a meaningful portion of my money. One feature I particularly like about many digital advisors is that they allow you to customize index portfolios. Instead of simply buying the S&P 500 or a broad market ETF exactly as it exists, many platforms let you permanently exclude individual companies that you don’t want to own.
It’s an interesting exercise because it forces you to ask a simple question: If I owned the entire market, which companies would I intentionally remove?
Notice that this isn’t the same thing as asking which companies will necessarily perform poorly. Those are two entirely different questions. Some of the companies below may double over the next several years. Some may become phenomenal businesses. This isn’t a prediction of future stock performance.
It’s simply a list of companies where, after years of following markets, I don’t particularly like the smell of the kitchen. Whether it’s accounting that I struggle to understand, governance issues, valuations that seem disconnected from reality, capital structures that rely on constant financing, promotional management teams or business models that leave me with more questions than answers, each of these names has accumulated enough yellow flags for me that I’d simply rather own something else.
There are over thousands of publicly traded companies in the United States. I don’t need to own every winner. I just need to avoid the disasters. These are the nine names I’d tell my advisors to leave out.