After Running Up 69%in 4 Months, Selling WLDN

We must all suffer one of two things: the pain of discipline or the pain of regret or disappointment. – Jim Rohn

Be fearful when others are greedy. Be greedy when others are fearful. – Warren Buffett

My best performer for the past 4 months, Willdan (Ticker: WLDN) might also end up being my biggest regret for two reasons:

  1. My initial position was in too small a size, about 0.05% of my portfolio.
  2. Momentum could carry it further.

I bought in November soon after the election when it became clear that infrastructure was going to be an actual priority. WLDN had been growing a lot and wasn’t expensive for the growth at the time. So I took a small position around $19/share and sold after last week’s earnings report at $33. The earnings results themselves were fine and the company sounded solid, but the multiples have blown up on this name.

My initial decision to research WLDN came from this write up. I didn’t know much about the company going in, but similar to my other small bets (VG, RSYS, TSL, and RDCM), my intention was to start small and add to the winners. This one got away from me, and at a TTM EBITDA of 20x, a Forward P/E of 25x and no defensible moat that I can see, I can’t justify holding on. I have to obey the iron law of valuation, even/especially when it’s tempting to say “but this time is different”. So I’ll choose the pain of discipline – look for other stocks with more attractive intrinsic valuations, and size my initial position appropriately.

In the short-term I think WLDN may go higher still, and if I had a larger position to begin with I could have trimmed rather than exiting. Lately I’ve been working harder to start every position with no less than a 3% position, which should help me to avoid having to bail from another runner like Willdan earlier than I would like.



Author: secondhandstocks

The genesis for this blog stems from a Marine buddy and I came back from Afghanistan with more money than knowledge, and heedlessly tossed our hats into the stock market ring. A few months later, I remember discovering the classic book The Intelligent Investor by Graham and Dodd, and ravenously devouring my first introduction to value investing. That framework - with some generous additions by Seth Klarman, and Joel Greenblatt among others - guides my investment philosophy. I spent five years working in the intelligence field, both in the Marine Corps and then for a government agency after that. I speak Arabic and Pashto, have programming and analysis experience, and enjoy investing in technology companies as a hobby. I also spent a year on Wall Street working on a #1 Ranked Institutional Investor team, before deciding that that the Sell-Side was not for me.

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