Sometimes I think I am repetitive, but that is how we learn and understand. From my experience despite my age, I think it is imperative to understand that emotions and investing do not mix. You can have gut instincts, but I dont think that is comparable to emotions. At the end of the day the market is about making money, that is the ultimate endgame at least for me. The stock market does not care about your emotional attachment to your holdings, you can own a great business and the price of the security can get cut by 75% and still be "expensive" per market standards. Do not forget how much of an anomaly 2020 was, be positioned accordingly. Understand when and how to cut risk quick.
Does a -75% slice change your mind or make you rethink your thesis? For some people I am sure this is the case. I think for one to truly separate their emotions from the stock market (or their portfolio), you just have to really know what you own. So I want to take a bit and talk about that. Let me use my darling Cloudflare as an example, the share price could get cut by 50% in the next 6-9 months for all I know, but will they still be growing and Matthew Prince still be leading them to victory on new enterprise wins, expanding product portfolio, and customer retention? Yeah, I will place my bets on that. I am comfortable and sleep very well at night knowing the business is firing on all cylinders and I continue my reading on them on a daily basis, literally. I try to find something new whether it is 10 years old, or one week old. You can never know enough. The most recent was the Harvard Business Review PDF I shared on Twitter.
What I am personally seeing and understanding, is the flow of liquidity that is making crappy public businesses extremely overvalued and make for very momentous trades. You can even see it in the charts. Cloudflare is probably overvalued, but it held up way better than a lot of these names and never even touched the 200-dma (knock on wood). I call that relative strength. I am also not in the camp that the "COVID beneficiaries" are going to go to $0.00. I just think they will be out of favor for a while, and this business is about making money. You can make money if the share prices are up, down, or sideways. I think there a lot of people who simply just should not look at the stock market on a day to day basis, I think it can cause irrational decision making and make someone blind to the original thesis (if they had one, cannot borrow conviction).
Look, indexes are barely off their all-time highs. The only ones taking a beating are really the ARKK names. You have to understand the risk you are taking when you invest in something like this, where majority of the companies in it have literally no cash flow or earnings (yeah I understand the whole growth thing, look at my portfolio). It comes with the territory.
If you are a momentum trader, just admit it honestly. I have two separate accounts for my two separate strategies. One = long-term growth on businesses I like, and two = active trading and make a ton of money to pay bills and live.
Bottom line, stop being emotional. It is very obvious and not a good look when it comes to this business.
Current News Flow
In December of last year, we wrote about how the massive cash piles and suspension of dividends and share repurchases will be just another juicer to the market, well, now there are articles on this exact thing. --> https://www.wsj.com/articles/companies-are-flush-with-cashand-ready-to-pad-shareholder-pockets-11621157406?mod=markets_lead_pos1
This year, there are been authorization of $504b of share repurchases. The is the most in the last 22 years. Even more than the 2018 tax cuts. So, do not be complacent, but.... damn. Dividends have also been increasing, aggregated $20.3b on an annualized basis. COVID clouds are clearing and to me, this is why the growth names are taking such a beating. These two things are huge news for more value oriented investors, if we must. Between ITA and IHI I am hoping to get more exposure here, Defense and Med Device ETFs.