Investing literature is full of stories about buying great businesses. Much less is written about the far more uncomfortable reality of owning them after they disappoint you.
Every investor enjoys discussing their winners. Few enjoy discussing the positions that have tested conviction, patience, temperament, and analytical discipline for years.
Over the past several years, four positions have weighed on the family portfolio: Tencent, Alibaba, Adobe, and Nike.
Tencent
Regulatory fears, geopolitical concerns, and persistent pessimism surrounding China
Alibaba
Regulatory intervention, slowing growth, governance concerns, and collapse in investor confidence
Adobe
Market questioning whether generative AI represented an opportunity or an existential threat
Nike
Operational mistakes, inventory issues, channel mismanagement, and deteriorating financial performance
The easy thing to do during periods of uncertainty is to sell. The difficult thing is to determine whether the market is correctly identifying permanent impairment or merely reacting emotionally to temporary adversity.
This distinction determines whether an investor compounds wealth or transfers wealth to someone more patient.
This note is not an argument for holding every declining stock. Many declining businesses deserve to be sold. Rather, this is an examination of why I initially invested in these businesses, how the investment theses evolved over time, and why panic selling was ultimately rejected despite substantial periods of underperformance.
The First Principle: Stocks Are Ownership Stakes, Not Tickers
Before discussing the individual positions, it is important to establish a foundational principle.
The stock market constantly tempts investors to evaluate investments through price action.
- A stock rises.
- A stock falls.
- A stock underperforms.
- A stock outperforms.
Yet none of these events directly tells us whether the underlying business is becoming more valuable. A share certificate is ultimately a fractional ownership stake in a real business. Therefore, the primary question is not: “What has the stock done?” The primary question is: “What has the business done?”
This distinction sounds obvious. In practice, it is extraordinarily difficult. When a position declines 30%, 40%, or 50%, the emotional pressure to act becomes immense. Every negative headline suddenly feels important. Every bearish argument feels persuasive. Every temporary setback appears permanent.
The discipline required is not intellectual. It is psychological.
Position OneTencent: Betting On A Digital Infrastructure Monopoly
What Brought Me In
My original Tencent thesis was surprisingly simple. Tencent possessed one of the strongest superapps ever created. WeChat had effectively become a digital infrastructure within China. Its gaming business owned some of the world’s most valuable intellectual property. Its advertising business, comprising 19.73% of revenue, possessed powerful network effects. Its payments ecosystem enjoyed enormous scale. Its investment portfolio contained stakes in numerous technology leaders.
Most importantly, Tencent generated exceptional cash flows while maintaining high returns on invested capital. This combination is extraordinarily rare. Many businesses achieve scale. Many businesses achieve profitability. Few achieve both simultaneously while maintaining optionality across multiple growth vectors.
What Went Wrong
Then came the regulatory cycle. Chinese technology companies experienced one of the most dramatic valuation compressions in modern market history. Investors suddenly questioned everything: regulatory risk, political risk, delisting risk, capital allocation risk, and economic risk. The market’s narrative shifted from “Tencent is an exceptional business” to “Chinese technology is uninvestable.” The share price reflected this change in sentiment.
The Thesis Today
The central question was never whether regulations would affect Tencent. They clearly did. The real question was whether Tencent’s competitive advantages remained intact.
Today, Tencent continues to possess dominant social assets, powerful gaming franchises, expanding cloud capabilities, significant AI investments, and substantial cash generation. Management has increasingly highlighted AI integration across advertising, gaming, and cloud services, while cloud profitability and growth have improved materially. Tencent Cloud achieved profit at scale due to increased enterprise demand for AI workloads, higher contributions from market-leading PaaS and SaaS products, and an optimised supply chain. Revenue and profit growth have reaccelerated as AI investments are layered onto already resilient core businesses.
Originally, Tencent was viewed primarily as a platform company. Today, Tencent increasingly resembles a platform company with AI optionality embedded throughout its ecosystem. The fundamental business survived. The valuation changed dramatically. Those are not the same thing.
Position TwoAlibaba: Separating Business Performance From Market Sentiment
What Brought Me In
Alibaba was initially attractive because it combined three characteristics rarely available simultaneously: market leadership, strong cash generation, and attractive valuation. The company dominated Chinese e-commerce. It possessed meaningful cloud assets. Its logistics infrastructure created barriers to entry. Its ecosystem generated substantial free cash flow. At the time of investment, the market largely focused on growth. I focused on economic value creation.
What Went Wrong
Almost everything that could go wrong from a sentiment perspective went wrong. Regulatory interventions. Antitrust concerns. Economic weakness. Real estate stress. Geopolitical tensions. Questions regarding the sustainability of Chinese consumption. Investor confidence collapsed. Valuation multiples compressed relentlessly. For many investors, Alibaba became synonymous with disappointment.
The Thesis Today
The key question became: “Has Alibaba’s competitive position deteriorated as severely as the stock price suggests?” My conclusion remained, to a large extent, no. Objectively, Alibaba is still one of the predominant tech companies in China.
While growth slowed materially, Alibaba retained substantial strengths: leading e-commerce franchises, large logistics networks, substantial cloud infrastructure, cutting-edge AI models, and strong balance sheet resources. Alibaba has been optimising its balance sheet through strategic divestments of non-core assets and focusing on growing its core businesses, improving return on capital, and enhancing shareholder value.
Most importantly, cloud and AI have emerged as increasingly important growth drivers. Qwen3.7-Max, Alibaba’s latest AI model, scored 1,541 on the Code Arena ranking to claim the fourth spot globally, placing it ahead of rival models from OpenAI and Google. Alibaba Cloud has reported growth acceleration driven by AI demand, with management committing tens of billions of dollars towards AI infrastructure and cloud expansion. AI-related cloud products have become a rapidly growing portion of revenue.
The original Alibaba thesis centred on commerce. The current thesis increasingly incorporates AI infrastructure and cloud computing. The thesis evolved. It did not disappear. That distinction matters.
Position ThreeAdobe: The Market Misunderstood The Nature Of The Moat
What Brought Me In
Adobe represented a classic quality compounder. The company possessed dominant creative software, recurring revenue, high switching costs, exceptional margins, and strong free cash flow generation. Creative professionals did not merely use Adobe products. Many built their livelihoods around them. That creates an unusually durable moat.
What Went Wrong
The emergence of generative AI triggered widespread fears. The market suddenly viewed AI image generation as a potential threat to Adobe. The narrative became straightforward: “If AI can generate images, why would creators need Adobe?” The stock suffered as investors questioned whether Adobe would be disrupted by the very technology it helped popularize.
The Thesis Today
The question was never whether AI would change creative workflows. It clearly would. The real question was whether Adobe would participate in that change or become a casualty of it. Thus far, evidence suggests participation rather than displacement.
Adobe launched Firefly on 22 June 2023 — not long after ChatGPT was first released on 30 November 2022 — and Adobe’s management was very serious about the threat of AI to its business right from the start, which is a testimony to Adobe’s management quality. Adobe Firefly has been successfully integrated into existing workflows. Adobe embedded AI capabilities across its product suite. It leveraged distribution advantages, customer relationships, and enterprise trust.
Importantly, Adobe’s financial performance has remained resilient, with revenue growth increasing steadily while newer and better versions of its AI-related offerings contribute increasingly meaningful economic value. Management has consistently positioned AI as a productivity enhancer within existing creative ecosystems rather than a replacement for those ecosystems.
The market initially viewed AI as a threat. I increasingly viewed it as a feature. The difference between those two interpretations created an opportunity.
Position FourNike: The Most Difficult Position Psychologically
What Brought Me In
Among these four companies, Nike was arguably the simplest thesis. The company possessed one of the strongest brands in the world, global distribution, deep consumer mindshare, significant marketing advantages, and long-term pricing power. For decades, Nike demonstrated an ability to transform athletic products into cultural products. That capability is very difficult to replicate.
What Went Wrong
Unlike Tencent, Alibaba, or Adobe, Nike’s challenges were largely self-inflicted. Management overemphasized direct-to-consumer channels. Relationships with wholesale partners deteriorated. Product innovation slowed. Inventory levels became very problematic. Competition intensified. Financial performance weakened. Revenue declined. Margins compressed. Investor confidence eroded. Fiscal 2025 results reflected these pressures, with revenue declining meaningfully and management acknowledging performance remained below desired levels.
The Thesis Today
Nike remains the stock position that requires the greatest humility. The turnaround is ongoing. Success is not guaranteed. However, the central question remains unchanged: has Nike permanently lost its brand advantage?
My conclusion remains no. Recent management initiatives have focused on the ‘Win Now’ strategy, restoring wholesale relationships, refining its direct-to-consumer approach, prioritising fewer and scalable product franchises, improving assortments, restoring shelf presence across key retail channels, restructuring the business around specific sports rather than consumer segments, and reigniting innovation across Nike’s portfolio.
While financial recovery remains incomplete, the company appears focused on correcting strategic mistakes rather than defending them. Importantly, there is a difference between a damaged brand and a temporarily mismanaged brand. Nike appears far closer to the latter category. Time will ultimately determine whether that assessment is correct.
Nike requires the greatest humility of the four positions. The turnaround is ongoing. Success is not guaranteed.
The Discipline Of Not Selling In Panic
Holding through drag is not an act of stubbornness. At least, it should not be. The distinction between discipline and stubbornness is evidence. Stubbornness ignores evidence. Discipline evaluates evidence carefully before acting.
Whenever one of these positions declined materially, I attempted to ask the same questions:
The five questions
Has the competitive advantage weakened?
Has management destroyed capital allocation discipline?
Has industry structure permanently deteriorated?
Has intrinsic value declined proportionately with price?
Would I still buy the business today?
These questions help separate price volatility from business deterioration. Most market participants focus on prices. Long-term investors focus on economics. The two frequently diverge.
The Reality Of Compounding
One of the least appreciated aspects of investing is that successful compounding often looks uncomfortable. Businesses rarely travel in straight lines. Industries evolve. Competition emerges. Regulations change. Economic cycles occur. Narratives shift.
Even exceptional businesses experience periods during which shareholders question their own judgment. This is normal. In fact, it is often unavoidable.
The investors who benefit from long-term compounding are not necessarily those with the highest IQs. They are often those with the greatest ability to remain rational, while others become emotional.
That sounds simple. It is not.
Final Reflections
Tencent, Alibaba, Adobe, and Nike have all weighed on the family portfolio. Some challenges were external. Some were internal. Some were foreseeable. Some were not.
Yet the central lesson remains unchanged. Investing is not primarily a test of intelligence. It is a test of temperament. The market continuously offers opportunities to abandon a sound thesis for emotional comfort. Selling in panic provides immediate psychological relief. Unfortunately, psychological relief and investment success are often negatively correlated.
The objective is not to avoid mistakes. That is impossible. The objective is to distinguish between a broken stock and a broken business.
- Tencent taught patience through regulatory uncertainty.
- Alibaba taught patience through extreme pessimism.
- Adobe taught patience through technological disruption fears.
- Nike taught patience through operational adversity.
Whether each investment ultimately becomes a major long-term winner remains unknowable. What is knowable is this: the discipline of investing requires judging businesses by their evolving economics rather than by their fluctuating share prices. That principle has guided the decision to continue holding these positions.
And over a sufficiently long investment horizon, it is usually the quality of the business — not the intensity of the market’s emotions — that determines the outcome.