LongTerm Compounders vs Short Term Obvious Opportunities

This post i’m writing is w.r.t one of Mohnish Pabrai’s talk on his investment style changes and the cost of making mistake of selling the long term compounders too early.
In one of his sessions with students Mohnish Pabrai mentioned he invested in Amazon in 2002–03 at 10$ and had put 10% of this portfolio. At the time his fund was 70–80$ million. It’s now an almost 300X missed opportunity.
Even at $5million, it comes to around $1.5 billion money left on the table.

The opportunity cost of selling the long term compounders is too high in the long run. Since these businesses are very good engine of growth.
Even though the cigar butt style investing can be very comfortable, and seem very obvious at the time. There’s reinvestment risk attached to it.
Cigar butt style probably makes good investing if market remain depressed for longer period of time.

The inversion thinking to this would be, let’s say even though you found the great DNA of the company, which of long term compounder. There’s still lot of chance it’s going to fail. Jeff Bezos him shelf would say Amazon had a 70% chance of success. Let’s we had high interest rates in the early days of Amazon, 2002–03 onwards, Money supply was not so easy, there’s a decent chance of Amazon wouldn’t be able to compound as well, because they had to produce free cash flow early . Because the cost of capital would be very high.
Loss tolerance in these scenario wouldn’t be so long. Since it’s existence in 1996, only in 2017–18 Amazon produced decent Net Profit .

Hindsight is always 20/20.

They’re not so obvious at the moment, and definitely not easy to hold for so long. But even then opportunity cost of missing long term compounders is very very high.