The biggest lesson I've learned on Seeking Alpha

After more than a decade and a half of writing on Seeking Alpha – complete with thousands of articles published, most of them containing stock recommendations – I've learned a lot of lessons.

I’ve learned how to write better, how to collaborate more effectively, how to analyze more productively… and the list goes on. But one lesson stands out above all the others, and it’s one that might surprise you.

It’s the fact that nobody gets it right 100% of the time.

Absolutely nobody. Not Warren Buffett (who I’ll zoom in on shortly). Not the smartest hedge fund managers on Wall Street. Not the talking heads on whatever your favorite Wall Street show is.

And, as much as it might be nice to say otherwise, certainly not me. Or you.

For my part, I've recommended plenty of stocks and other investment opportunities that delivered extraordinary returns. And I’m very proud of those. Make no mistake of that.

However, I've also made some recommendations that fell short. They either didn’t make as much money as I thought they would, they actually lost money…

Or they were outright, unmitigated disasters.

I’m happy to say there aren’t too many of my past suggestions that fall into that latter category. But I still have to admit to a few. Moreover, I think it’s better that way.

I don’t think I would have had so many excellent recommendations otherwise if I didn’t get occasional reminders of how flawed I actually am.

In Dick Davis’ book, The Dick Davis Dividend, the Wall Street legend shares four decades’ worth of investment wisdom.

That includes a chapter titled "Six Absolutes." It covers a list of fundamental truths about investing that he found crucial to success. And after reading just the first one, I understood why.

Davis claimed that nobody knows the answers, and he was absolutely correct about that.

It’s nice to think we can find the end-all, be-all source of investment knowledge. Maybe we’re even hoping to become that beacon of financial benefits ourselves someday.

There are definitely people out there who already think they’ve reached that pinnacle of perfection. Wall Street is filled with people claiming that they’re the ones to pay attention to.

But if we’re honest, then we have to acknowledge we don’t know exactly what’s going to happen tomorrow, much less next year. And neither do any of our cherished sources.

Life in general is inherently unpredictable. So why should we think the stock market, which is part of life, would be any different?

Studying Wall Street’s long-term, mid-term, and short-term history shows that clearly. For instance, who saw last Thursday’s stomach-churning drop coming? Especially after Wednesday went so well?

Yet financial experts across the board continue to fall into the same trap as always, thinking they’ve got it all figured out. I guess that’s the downside of education: hubris.

When you spend years studying micro- and macro-economics both on paper and in person, it's easy to conclude you've figured something out. Which, hopefully, you have.

But you’re asking for trouble the second you think that “something” means “everything.” Or when you start thinking that someone else can claim any such thing.

Like most financial publishers, Wide Moat Research has mentioned Warren Buffett a time or two.

Also like most financial publishers, the vast majority of those mentions have been positive. Because, really, how can they not be?

As Nick Ward brought up on Friday:

It’s no wonder then that most people consider him the greatest investor of all time. Yet Buffett himself fully acknowledges that he’s made mistakes along the way.

He discussed one such error at Berkshire Hathaway’s 2004 annual meeting. Apparently, he had turned down an opportunity to buy additional shares of Walmart (WMT) right before they rose quite significantly.

According to Buffett’s estimate, he lost out on about $10 billion as a result. And he didn’t hold back on admitting as much.

Howard Marks, co-founder and co-chairman of alternative investment management firm Oaktree Capital Management, describes this as intellectual humility. It's the ability to be confident in what you know without being arrogant.

And it’s exceptionally important.

That’s why I won’t shy away from pointing out one of my own biggest investment misses. It happened in August 2023 when I published a Seeking Alpha article titled “Medical Properties Trust: Let me tell you about the lonesome loser.”

At the time, Medical Properties Trust (MPW) was quite the controversial real estate investment trust (REIT). The stock had fallen more than 50% over the last 12 months, and the dividend yield sat at above 15%.

Yet I was still holding it in two different personal accounts, where I was down 28%–29% on both sets of shares. I jokingly referred to myself as the "lonesome loser" because of this, borrowing from a Little River Band song I heard at the gym one day.

But beneath the humor was a serious problem.

Truth be told, I’d become too attached to my investment thesis that hospitals were essential infrastructure.

They are, for the record. I wasn’t wrong about that. But just because an asset is essential doesn’t automatically mean investing in it will pay off.

I could believe in the underlying real estate’s value all I wanted. (Which I did.) And I could trust management’s ability to navigate Medical Properties’ financial challenges all I wanted. (Which I also did.)

Unfortunately though, wanting wasn’t enough. Not when one particularly problematic tenant, Steward Health Care, represented over 20% of the REIT’s annualized revenue.

Or when its leverage was so elevated, with adjusted net debt to earnings before interest, taxes, depreciation, and amortization for real estate (EBITDAre) sitting at 6.8x.

Or when the dividend consumed nearly 97% of adjusted funds from operations (AFFO) after adjusting for noncash income.

I acknowledged every one of those warning signs. Yet I still thought Medical Properties could pull through, a position I maintained through the end of the year.

It wasn’t until January 2024 that I finally downgraded it to a Hold. And even then, it took until October 2024 for me to recommend selling it – well after the damage was done.

The following January, I published another article titled “Pride comes before the fall: a lesson in intellectual humility with Medical Properties Trust.”

It wasn't particularly easy to write, much less publish. When you’re wrong, you’re wrong though; and I was finally ready to face that fact.

I hope I never forget the feeling of discomfort at the end of that messy, pointless investment journey. Not because I think it’ll keep me from making similar bad judgement calls in the future.

But it had better keep me from waiting so long to admit it.

As I’ve learned after 16 years on Seeking Alpha, successful investing is far less about being right all the time and much more about managing risk and protecting capital. It’s vitally important to fully grasp the importance of acknowledging our mistakes before they blow out of proportion.

When we do that, we’ve got something much more useful than the pursuit of perfection on our hands. We’ve got a realistic, achievable path to financial security that’s very hard to beat.

Happy SWAN investing,

Brad Thomas
Editor, Wide Moat Daily