Farfetch Failings

A business is the present value of all its future cash flows. I will do well to remember that. I know I had the assumption that they would be break-even EBIDTA this quarter, but they would not be. I can't keep catching falling knives. I compounded my error by doubling down every time that its stock fell. That only works if it was original a plus EV bet. Maybe I was due and all it took was one to wipe out profits from ATVI, SPWH, and SAVE this year.

Liquidity or the lack of is what doomed them ultimately. Cash to a business is like oxygen to humans. I can't bank on the kindness of strangers or a zombie companies go up even more. Leverage always hurts. I cannot rely on good luck like Carvana and other zombie companies.

Uncertainty should have forced me to be smarter and survive as the #1 rule. I had a chance to get out with minimum loss when Neve was rumored to buy it, but chose to gamble. Difficult to make a decision like that as hindsight, but I should have sized more appropriately and not have been in that terrible spot. Don't get in that situation is the easiest way to not lose.

Bet sizing was a failure on my part here. I had committed over 20% of the portfolio to this position. The last third of the position was not meant to be a position, but just to replace the third in a taxable account. Even replacing the 25% less, I still had 15% of the portfolio on a speculative gamble best left to VC. I had several times to sell to "not lose" money, but failure to do so cost me 25% of the losses. I was spoiled by two previous trades with SPWH and SAVE. I had returned 65% in <2 months on 15% of the portfolio with SPWH when I bought on its earnings collapse and returned 45% in <2 weeks on 7.5% of the portfolio with SAVE when it collapsed to 8.88 and I thought it was worth an arbitrage play. They were both more sure bets than FTCH and my sizing was smaller. 

If you don't know yourself, the market is an expensive place to find out. I know it is all back to the basics: value, bet-sizing to survive (aka Kelly Criterion conservative times 2), and the perspective of "Sub Specie Aeternitatis."