You Gotta Have Heart

By: Yale Bock

In competitive sports, there are often lopsided games where one team is superior to the other. As an example, the Super Bowl has often turned into an absolute thrashing, like what the Seattle Seahawks did to the New England Patriots this year. It happens in many contests at every level, from grade school to professional athletics. During these games, when one team is losing badly, coaches can do one of two things. They can continue to search for ways for improvement, both by the players who play and how the players execute what has been practiced, or they can accept defeat without adjusting the group’s performance. During these occasions, attentive and intelligent coaches give scrutiny to which players work harder to perform what is being told. Anyone can execute when a team is winning by thirty points. The most difficult situation is when a team is behind by thirty points, and the belief is, well, let’s call it waning. 

Joe Montana and Tom Brady, the two most successful quarterbacks of the last century, both were in situations, either in college or professionally, where they were stuck deep on the bench, call it fifth string or worse. It means they had to wait for an opportunity to play, and they only got it when the team had a difficult situation. Eventually, they earned their chance to play, and when they got it, capitalized on it. Why is this pertinent for investors?

It is well documented that the most successful investors are correct around 55-60% of the time. It means that nearly half of a portfolio will have assets which have underwater prices, meaning losing money if they are sold. If one were to look at the magnitude of loss, on some occasions a position can lose well over 25% of its value. Extreme volatility in the market is always present. For example, this week, we saw a situation lose over 70% of its value because the company announced the potential loss of a contract of ten percent of its revenue. It is a billion-dollar company that is very profitable on almost every metric. When you own stocks, you have to realize your companies are going to go through fluctuations in their performance. Most of the time, their operations aren’t going to be running perfectly. The important question is why do you own it in the first place, and what is the company doing to improve the business? In nearly all cases, management teams have plans which explain what is being done and why. As an investor, you must know those plans as well or better than the rest of the investment world. When others are nervous and want to sell at a price which makes no sense, you are there waiting to buy their shares. You also should try to have a particularly good understanding of the largest shareholders of the company. If they decide to sell, their actions will affect the price of the stock. They may have personal reasons for selling, or it may be related to some kind of conflict or difference of opinion within the company. You will not know this. Again, the question is whether you believe in the underlying premise of why you own the business and your faith in the management team. Owning a stock is not like being an athlete who is playing in a losing game because there are financial circumstances involved. Still, the ability to be patient, hang in there, and do your best when the game, or market prices, are going against you, is very much a major part of investing.

Originally posted on Jun 1, 2026 on Y H & C Investments newsletter

DISCLOSURES

Y H & C Investments may have positions in companies mentioned in this newsletter. Nothing in the newsletter should be taken as an offer to buy or sell individual securities. It is the responsibility of each investor to research the investments mentioned so they can decide on the appropriateness and suitability of the investments consistent with their risk tolerance, risk constraints, and return objectives.