Over the years I have sold totally my positions in former favorites that showed negative outlook after review. That included some serious favorites at the time. Examples include some wise choices and not-so-wise. There were three really influential choices I made:
Xerox- sold in 2000 as the PARC role waned and Richard Thoman came in and promptly alienated the sales force and Fuji. His successor, Anne Mulcahy, turned it around but I had sold. That was an excellent long run.
Vepco- perhaps my stupidest ever move, the relic of my 1960's teen age fascination with nuclear power (I actually got a rich scholarship to study nuclear engineering but luckily decided otherwise-for poor reasons, truthfully). Soon after I began to revise my techniques.
Honda- bought when I knew nothing except that the S600 I owned in Thailand was spectacular. I thought that if their first car was like that they'd do great things. I had zero understanding of anything at all. That one I sold to fund graduate school. While in graduate school I began to learn how much that had in common with other innovators.
The last two helped me understand that enthusiasm and even knowledge was no substitute for sound analytics, which made me sell the first one actually. Eventually I learned to combine technology, finance, marketing and social psychology, influenced by this:
https://www.amazon.com/Extraordinar...d+the+madness+of+crowds&qid=1580995034&sr=8-1
Published in 1841 it was included in a social psychology course I had during my first graduate school stint (bizarrely I did an MA in Social Psychology along the early years). That helped me to understand a bit better how the hula hoop worked, and how the seemingly impossible can capture popular support.
A few years later when Honda happened I remembered. I actually met Soichiro Honda in Thailand, which at the time was their first manufacturing outside Japan, I think:
Soichiro Honda Biography: A Great History of Japanese Car Manufacturer
It took decades to make me recognize that he understood how important a sound marketing posture could be. At the time zero ads. He just made his team introduce non-Japanese to his products. Although I ended out buying one of the first S600's and they even changed the color for me, I only realized that I was explicitly targeted as a logical influencer of other sales. That worked. Now, faced with the 2020 version of that genius, I begin to understand Elon Musk as a "kindred spirit" of Honda. Honda was a major influence in helping me form my later ideas. Thus...
In the selling decision for TSLA unless I see huge advances in management maturity, if Elon were to exit I would sell.
OTOH, I look also at context so really am not so doctrinaire. Gwynne Shotwell would continue Space X without Musk.
She is quite analogous to Tim Cook, as a less flashy successor to a flamboyant public face.
My personal method for dealing with management succession is crucial to my decision to stay, sell or double down. I wish I could better explain how that works in my own evaluation. Fundamentally, any key person departing or joining triggers a reevaluation for me. Procedurally I do all I can do to provide due diligence on each major change. That does not translate to memorizing everything about them. It does mean I look as closely as possible at the personal support systems that key innovators have. In the case of Elon, he has gigantic mitigants to what would otherwise be disqualifying flights of strange behavior. Specifically his mother, brother and sister are all three active in his life, with Maye and Kimbal always seeming to be around at key moments.
Most securities analysts ignore that perspective, but they are major issues.
Citicorp decline began when John Reed began an affair with a Citicorp flight attendant, whom he later married.
Chase Manhattan Bank decline began seriously when the CEO's spouse died and the chosen successor himself died.
I was involved with both of those institutions when those events happened.
In the numerous cases of failure and/or decline I have witnessed, there were preceding management changes that seemed inconsequential from an investment perspective.
So, what triggers my serious reviews? Management change that I cannot explain satisfactorily.
That does mean I am poring over everything I can find about TSLA pretty constantly. It also means I am looking very hard to see anything problematical. With the Tesla growth rate and constant change there are always questions. Through it all a core support system for Tesla has always been around, in the Board itself, as well as among crucial senior management. I came very close to bailing when JB Straubel left, until I realized that he had successfully helped put in place an overwhelmingly competent group of people who knew more than he did (e.g. Dahn, Maxwell, Hibar) and with raw materials deals with Guafeng, Kidman and others. Those were not JB alone by far. They did show how well Tesla would do without him, further shown by supply agreements with Samsung, LG and CATL as well as Panasonic. All of that showed me that the critical need for JB had diminished.
In a special category is utility and commercial storage products. Had there been even a tiny glitch in these after JB left I would have been unnerved enough to reduce my exposure, maybe sell all.
Without endlessly poring over details, the evidence I tend to look for as management change risk is any slowing in the rate of new talent acquisition and new supplier arrangements. Everything from seat manufacturing, glass suppliers to new factory development demands constant attention. So, when I hear of problems in any given area I tend to look at how deeply Elon seems to be personally involved. Thus I came close to selling in early 2018.
Tesla has become increasingly stable, finance functions are clearly better than they have ever been, manufacturing is making outstanding progress, legal progress is already evident, and management depth is provably improving as evidenced by improving supply chain and logistics in every category, even parts availability and service.
All of those are indicators that always will give early warning of problems needing review.
Bluntly, that is why I rarely hold more than four securities at a time. Finally, diversification is what one does when one has no idea what one is doing. Diversification does not reduce risk, it allows ignorant people to depend on other ignorant people to diversify risk. Bollocks!
My personal practice is to accept volatility and avoid risk as much as possible.
