In my recent post about the Twilio announcements I wrote the following:
Reflections on buying stocks
I added some Twilio yesterday and today, at $39.88, $40.85, and $41.40. The price as I write is $41.65, so my original purchases are up 62% since January. I have no hesitation, as you know, to add to my position on the way up, even up 60%. I prefer it. I know that there are people who try to wait for a pullback to buy a little cheaper. I never get the cheapest prices.
I was thinking about it today and I decided the secret of (my) success in stock investing isn’t trying to buy stocks that are a little cheaper, but is trying to buy stocks of companies that are going to be very successful. To buy stocks, not that are a little cheaper than they were, but to buy stocks in great companies. Sure if a stock in a high conviction stock pulls back for no reason I may add to a position if I have the money, but I never wait for a stock to go down before buying it. I’m buying it because I think it’s going to go up, after all.
Since then I gave some more thought about what I wrote. I still hear people say “I had a buy order in at $26.10 but I just missed getting it by 10 cents.” That makes me think about some of my stocks. I started buying Shopify two years ago at about $27. It was first recommended by MF a few dollars below that, and I could have said “I’ll put in an order at $26.10 and see if it moves back and I can save 90 cents.” – and I would have missed getting in. As I write its at 467% of what I paid for it. It’s at $126.00 now. Do you think I care or remember whether I paid $27.00, or $26.75, or whatever?
People get so happy when they save that 90 cents, or 50 cents, or 25 cents, or whatever, and remember it as a success, but they ignore the 100x greater catastrophe of the ones they missed buying by trying to save a dime. And by the way, Shopify rapidly rose 60% from $27 to (drum rolls…) all of $43 (not so high in retrospect, is it?), and I was still buying, just as I was with Twilio.
Or consider some others, like Square, where I started last year at $17.50, and closed yesterday at $51.40. It was up 60% from my first purchase when it was still all the way back at $28.00. Or look at Nutanix, which I started buying near the end of last year at $21.70 and which closed yesterday at $55.50.
That’s how you make money investing, not by saving pennies by buying a stock a little cheaper, or waiting for a downturn so that you can add a little cheaper. The trick is to buy super-stocks and add to them as they prove themselves by going up, unless you have a reason to sell them. Just my opinion.
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