It’s not often I get that lump in my stomach but yesterday it happened. Assertio Holdings, an investment of mine, had a stellar first half of the year. They were cheap, growing, and just closed a deal reducing their risk and adding a potential multi-billion dollar product to their repertoire.

As I sat down to listen to their quarterly update, out of the corner of my eye, I saw a flash of red, Assertio’s stock price plummeted. The market had just closed and their share price was down almost 40%. It must be a mistake I thought, so I looked around and most sites didn’t have the price drop. Must be a glitch….. Then I found it, another generic was approved, Indocin, Assertio’s leading product just got some competition. My stomach sank, the price drop was real, Assertio’s stock price had been cut 40%.

Loss Aversion is Real

I should not have been surprised, but I was, this was a risk I spelled out in my deal memo, twice. The quarterly update started and I listened intensely. I heard the shock in Dan and his team’s voices, and even more so in the analysts’ questions. No one had saw this coming.

Git-R-Dun Action Bias

The call ended and I needed to do something, should I sell, should I buy more, how do I make back that $. I walked around the living room like a zombie with all sorts of thoughts rolling through my head, none of which were helpful, all the while my three kids had started to latch on to me, thinking I was some kind of carnival ride. Soon they started talking, then yelling….Can we go to the pool! Let’s swim daddy… can we go, can we go, can we go. It took me a minute to even realize they were there, hanging and yelling and then a bit longer to hear their shouts, but once I broke out of my zombie-like state, I told them no swimming. I was dead set on doing something about Assertio.

After a few more minutes I realized the thunderstorm happening inside my head wasn’t working so I adjusted and reviewed my portfolio, the research, the model and my deal memos.

Pulling the Mask Off

I had prepared for this, allocated my portfolio in a way to handle the potential downside and I had almost forgotten that Assertio now owned Rolvedon, the new product which held 3 ⁄ 4 of the businesses potential value (in my opinion).

I had blanked that all out, the effects of the price drop, the lump in my stomach, and the need to do something, had taken hold. Oh yeah, did I mention the market had been closed for over an hour now, I couldn’t have taken “action” even if I wanted to.

There it is, rationality seeping back in….

I put on my swimsuit and we went to the pool.