Take a chill pill

Wow…lots of bad posts.

And lots of good ones. One I liked a lot: https://discussion.fool.com/i-don39t-get-it-as-much-as-saul-bear…

epm0306 said: I don’t get it, as much as Saul, Bear and the other board managers let us know what should and should not be posted, folks still feel they need to speak about things that have little or no merit. Monday Rules of the Board comes out weekly, you have college level information if you read the Knowledge Base, multiple times. Sure, it is difficult to watch the the stock prices of the great companies we own fall, but that’s what they are great companies. I bet even today they are all out there adding new enterprise clients, developing new products, etc… in the face of Covid, Recessions, Inflation yadayada… The sky is not falling, post something that helps the board, dive into a companies financials, see if the companies growth thesis has changed, let us know that. That’s what this board is about.

What that bolded phrase made me think of is March 2020. The sky pretty much was falling. “It’s different this time” was really true. We hadn’t seen anything like covid in many decades. A lifetime of investing wouldn’t have prepared you for that! What happened next? Most of our portfolios tripled. Not saying they will triple again. Just saying, take a longer view. My portfolio was down about 7.5% today. I didn’t enjoy that. It’s down more than 22% in this young year of 2022. But it’s up 397% since January 2020. We need to relax.

Bear

112 Likes

Hi Bear,

I do appreciate threads like this sometimes.

Although this board is only for discussion for individual high growth companies but people are in so much pain now, we do need to huddle together for comfort.

I haven’t sold anything since the rout started but it sure is painful (with real consequences to my financial goals).

13 Likes

Hello Bear,

“My portfolio was down about 7.5% today. I didn’t enjoy that. It’s down more than 22% in this young year of 2022. But it’s up 397% since January 2020. We need to relax”

I think the angst that people have is that they don’t have the profit cushion you have built up since January 2020, or even 2-3 years earlier. Many have found this board in mid to late 2021, tried to replicate the concentrated hypergrowth portfolios and over-allocated to UPST right before earnings…

There were some posters who stated that they had sometimes 30,40, and even 80% of their portfolios in this one stock. A concentrated works both ways on the ups and downs…

42 Likes

As much as I appreciate the point of these types of posts, I cringe every time I read something like:

“I may be down XX% from my ATH, but I’m up XXX% since (insert random date), so everyone chill out!”

That’s great, really, and we should all be happy for investors that have made a killing in these types of stocks over time. Unfortunately, for someone who found this board in November 2021 and went all-in super concentrated hypergrowth, can we really expect that person to feel the same level of chill as someone who’s banked 300-500% gains since January 2020?

I don’t think that’s fair. It sort of alludes to past performance being indicative of future results. But I must say I absolutely love the reassurance of posts touting the present and future prospects of our companies as being reason for continued confidence. Those get me fired up.

37 Likes

“I don’t think that’s fair. It sort of alludes to past performance being indicative of future results. But I must say I absolutely love the reassurance of posts touting the present and future prospects of our companies as being reason for continued confidence. Those get me fired up.”

And at one point someone like Bear was just starting out. Maybe even on this board, following other investors that had built up their portfolios over time, and before them there were others, and on and on.

That’s the way it goes when you first start out, you might likely catch a big sell off in your first year or first 6 months. Ask Bear how many 40% draw downs he’s held through in the years since he’s been on the board. Better yet ask Saul how many he’s been through.

You are missing the point. He’s not bragging, he’s mentoring the people that come after him, as he was mentored by Saul and possibly others. He’s saying, hold on, your time will come, stocks will come back and you will be rewarded just like he has and the people that were patient before him.

It’s just that simple. Panic will get you nowhere, most likely worse off, and trust me when I tell you this, if you do decide to stay the course and hold, this won’t be the only sell off you have to live through. There will be many others, and maybe 3 years from now when it happens again, or whenever it happens again, you will be the one way up after staying the course and helping to calm down the next set of newer investors.

TMB

69 Likes

I’m guessing Upstart is what a lot of newer followers are concerned about. If you’re like me you bought during the large run up in the fall and over-allocated based on what had the potential to be an incredible Q3. When the sell off first started more shares were added, and now the stock is down so much it has to 2.5 - 3x just to get back to your og cost basis. The opportunity cost of being so underwater on Upstart really sucks and I think a lot of people are not optimistic this is going to come back in a year or so like other drawdowns. The sentiment of the board suggests that as well, with so many experienced members reporting having dumped large portions of their position, if not selling out completely. It’s a deeply lonely, painful feeling, and, at least in my case, the catalyst for some of the increased concern.

My SAAS stocks are down as well, but nowhere near as much as Upstart, and I don’t really worry much about them because I’m closer to their products in my every day life and can better appreciate their prospects.

8 Likes

That’s great, really, and we should all be happy for investors that have made a killing in these types of stocks over time. Unfortunately, for someone who found this board in November 2021 and went all-in super concentrated hypergrowth, can we really expect that person to feel the same level of chill as someone who’s banked 300-500% gains since January 2020?

No, we can’t. But how about someone who found this board at the all-time highs of late 2018 after everyone else had built up huge gains for the year and then promptly saw a similar plunge? That was my experience, and I wrote in depth about it here: https://discussion.fool.com/stocknovice39s-end-of-year-portfolio….

Being honest, I feel kinda broken recordish - and I apologize to those who see this post as broken recordish - because this is now the third time I’ve linked this post in response to someone mentioning bad timing on entering these names. If you’re one of those people, please read the link above. The most important thing you can do is give yourself credit for getting started in trying to take better control of your financial future. Every single person on this board has gone through their first major pullback. Many have been through several. The good thing is the majority have not only lived to tell about it but seen great success since. There’s absolutely no reason those who have found this board more recently can’t travel a similar path. Pick any drop in the history of the market, and I can guarantee there was a subset of investors who started just in time to run right into the buzzsaw. The market’s timing works against everyone at some point or another (and it will unfortunately work against you many times if you figure out a way to stick around).

For those looking for reassurance on process or temperament, several experienced posters have taken the time to try and provide it. I also think Saul and the board assistants have been graciously lenient in letting some of these off-topic threads slide. However, some posts seem to be looking for a quick fix to recoup the losses. THERE ISN’T ONE. But don’t feel bad. No one is refunding my losses either (currently sitting -26% YTD). The silver lining is math, history, and time all continue to be on our side if these companies keep executing the way we expect. As I wrote in that 2018 post, “The easiest way to beat the market is to invest in market-beating companies.” I have no reason to believe any differently today.

148 Likes

“…the stock is down so much it has to 2.5 - 3x just to get back to your og cost basis. The opportunity cost of being so underwater on Upstart really sucks…”

I caution against chasing the past; thinking like this.

  1. This is anchoring. It doesn’t matter where it was or what it has to do to return to the past price point. All that matters is what the future opportunity is. I am not selling any of my Upstart shares because I feel the numbers look great and the price has come down a lot. If I believed this money would do better in another holding, I’d move it without regard for the past.

  2. Being underwater has nothing to do with opportunity cost. “Underwater” is a comparison with a past price point. A relative relationship between past price and today’s does not mean a thing for tomorrow’s, in and of itself. Opportunity cost is a comparison against another opportunity or decision. See my last point. Opportunity cost considerations start today; everyday.

33 Likes

Hi tier88,

Your intention is unclear: are you quoting this passage to support or contradict RafesUserName’s post?

If it is to contradict it, you are misrepresenting this board’s teaching. The board teaches that you should consider selling (i) if the story has changed OR (ii) if there is a better opportunity not yet present in your portfolio.

Nowhere is it taught that you should sell because the price has gone down (or up, for that matter).

If the story has changed and you keep it because you want to give it a chance, it qualifies as “hope investing”, or “turnaround investing”. I’m not judging, just qualifying.

If additionally the price has gone down and you keep it until it goes back to cost basis or to some other arbitrary point, it is “price anchoring”. In fact, it is “price anchoring” any time you only consider a stock price in keeping a company in your portfolio (it’s gone down so much!! I have to get back to level!!), without analyzing its prospects.

Such a behavior may cause an “opportunity cost”, i.e. you refuse to sell for a better opportunity, because you don’t want to realize your loss on the changed story, due to the above mentioned price anchoring.

Now, opportunity costs happen all the time, for example when a meme stock skyrockets next to my hyper-growth SaaS business. That’s life. But the method here helps you minimize the probability that it happens by helping you select the best companies, and helps you recognize such an opportunity costs when it becomes visible, when a story changes for the worse and the company next in line has brilliant numbers.

Hope this helps.

16 Likes

Dear all,

While what I am about to say is not specific ‘high growth company analysis’, it is what I, and many, feel to be a central tenant of investing, and as such relevant to the board.

  1. Only invest what you’re comfortable losing,

  2. Only invest patient money,

  3. Volatility/risk is the price we pay for excess returns.

I fear some posters either don’t understand this or have forgotten it.

This board is is about the PROCESS of investing. Results are a by product and, to some degree, only relevant when you ‘check out’.

Part of the process is getting your initial principles right.

If these downturns are hurting you, maybe you have learned that your mind-set for investing is not appropriate, yet.

12 Likes

JasonRen,

You are simply on the wrong board! This is not a board for discussing macro-econmic events. It’s especially not a board to discusses types of investing. This is a board for those who have decided on a particular investing methodology. If it’s a board to discusses various stocks, among those who have decided on hyper growth investing. Your simulated panic Does nothing to enlighten.

Gordon

17 Likes

Hi Jason,

This is not the first time our stocks have fallen greatly while the broad market was still close to ATH. It happened in February-March of last year as well. Our holdings went on to rally extremely strong from there. These stocks do not trade in lockstep with the market indexes, and that is exactly why there is alpha to be found here. It is irrelevant how large your portfolio is. If you are uncomfortable with your positions and cannot handle the volatility perhaps you are investing beyond your personal risk tolerance. It is often when you are most scared and wanting to sell that things are close to turning back up.

Kyle

7 Likes

Bear’s made his point. Adding new posts will provide zero value to this board. Please do not add to this thread.

Cedric
Asst. Board Manager

2 Likes

I have been following this board for little more than a year now and greatly benefitted from all the collective knowledge and wisdom. I have seen market volatility before and every time the market falls it pains me to see my portfolio value decline but this time it’s different, I feel more confident in the companies that I have invested in

I came across this very interesting and timely article from Mark Howard Co-founder of Oak tree capital and his thoughts on selling and overall principles very similar to what this board has been teaching

Cheers to all those using this time and pain as lessons in improving investment knowledge and building fortitude for high growth investment style.

https://www.oaktreecapital.com/docs/default-source/memos/sel…

Cheers!!!

3 Likes

Hi All,

Breaking my rule to post in this thread. Normally others here have handled information about the high growth companies we are focused on here, which I very much appreciate, so I read, enjoy, and recommend. This group is a signficant part of my investment research resources, together with other fool groups, members and of course, TMF generally. This group and TMF move independently, and I appreciate the ideas from the different perspectives.

I am still invested. I will continue to be invested because I have a plan. This is a group with a good track record of following a particular investment approach and reaping the benefits. You don’t have to follow this approach and have been warned multiple times to MAKE YOUR OWN DECISIONS.

We are in an environment where the SAAS companies are not as popular as investments, so the supply/demand characteristic of equity markets results in lower value. You can have a great company, but without buyers (or supporters), it can fail, simply due to humans’ irrational behavior.

As recounted by Morgan Housel:

Lehman Brothers was in great shape on September 10th, 2008. Its Tier 1 capital ratio – a measure of a bank’s ability to endure loss – was 11.7%. That was higher than the previous quarter. Higher than Goldman Sachs. Higher than Bank of America. It was more capital than Lehman had in 2007, when the banking industry was about as strong as it had ever been.

Seventy-two hours later it was bankrupt.

https://www.collaborativefund.com/blog/does-not-compute/

Mr. Housel and Tom Gardner also suggest certain limits on any single investment and have said in many different ways, you must KNOW YOURSELF. If you can’t take the volatility of this approach, don’t invest.

I have posted this elsewhere in the TMF forums:

For my own application I have added some basic rules to TMF’s approach which I happily admit I stole from whitewater nuts and i believe also apply to investing:

Questions to ask BEFORE you invest:

1) Do I understand the risk?

2) Do I have the skills/capacity/tools to deal with that risk?

3) if I’m wrong about my skills/capacity, am I willing to accept the consequences?

If you answer ‘no’ to any of those questions, please do not invest*.

*in the case of whitewater, don’t try the move, the rapid, etc. More recently, maybe the 100 foot wave guys.

Those questions are about UNDERSTANDING YOURSELF as an investor and also about TAKING RESPONSIBILITY. If you answer no to any of those questions, find a way to learn more about this way of investing and develop your skills and capacity.

If you answer ‘no’ but then invest your money anyway for some reason, you may win, but you can lose too. It’s been said all over this forum. Please don’t distract this very extraordinary working group with the pain you caused yourself. Find the lesson in what has happened - did you overcommit, did you not understand the company or the market, do you have the aptitude and personality for equity investing? Study the Knowledgebase here and read, read, read.

If you have data or a new investment opportunity, bring it. This could be a good time to invest - you decide. Otherwise, this group has work to do.

Thanks to TMF, Saul, and the Managers,

Bill

28 Likes