Hi Albert,
The examples used certainly highlight your point however there would be a longer list where if we used a stop-loss we would have been frustratingly stopped out of a position that went on to be very profitable. At MM we exit a position when the reason that we hold the stock has gone, especially from a risk / reward perspective, & / or the stock no longer represents the value it once did. That’s not about being a ‘value’ investor, but an investor targeting value in many forms.
It’s our belief (derived from experience) that stop losses should be used in mechanical trading systems that reply totally on price. Whether that be momentum systems, regression or one of the many technical trading strategies out there, but when a strategy relies on a combination of fundamental & technical analysis i.e. not as mechanical in nature, then stop losses are counter productive over time. There is no holy grail here, stop losses will work at times and not at others but I don’t believe stops at say 5% or 10% have any logic as its purely a predetermined monetary decision as opposed to taking into account the situation at the time and making a call i.e. markets are like a constantly evolving amoeba and should be evaluated as such.
That said, I get your point around the positions mentioned with the concept of ‘how much room’ should a position be given clearly important.
With regard to Zip, we did exit this from our Flagship Growth Portfolio and reduced the position weight in our Emerging Companies portfolio around $5.75 when the dynamics changed in that business. Hindsight says we should have exited completely, however the higher risk profile of the EC’s portfolio meant a small position was held.