Early Indications are that we might continue to sell-off tomorrow. Thereafter - perhaps we continue to sell off until we retest the 12,500 region bottom. Then - maybe we even crash thru that region and suffer more pounding and losses. All that is certainly possible if not probable. But here is the thing:
This sell-off - this correction, this potential Bear will be the springboard for presenting some of the most fantastic entry points for our companies we have ever seen. A second bite at the apple for the revolutionary companies we track. Once in a lifetime stuff? Maybe. I personally believe so and that the worse this gets the better our future opportunities become.
So I keep using the RTHG strategy in an effort to put investing funds in the hands of the companies that I think will provide the best return after the carnage ends - whenever that might be. In the interim, there will be rallies and those who take advantage of those rallies will be in a better place to profit as well.
So put worry aside and turn your attention to planning for the turnaround and remember that the only variable is time. And if you haven’t invested more than you can afford to lose - and you place your faith - and money - in the companies that are revolutionizing the way business is conducted - then your patience will be richly rewarded. This to shall pass.
Rock steady -Breath calmly - eyes to the front - and mark your target when it comes.
Maybe these firms were ginormously overvalued since 2019. Multiples are now at the high point
of where they were in the seven years before 2020. What appears to be once in a lifetime may just be
the siren song of price anchoring.
But Joe Investor could always go on another bender. So there’s that.
Maybe these firms were ginormously overvalued since 2019. Multiples are now at the high point
of where they were in the seven years before 2020. What appears to be once in a lifetime may just be
the siren song of price anchoring.
But Joe Investor could always go on another bender. So there’s that.
Ears
From your lips to my…ummm…ears.
This is sort of where I sit with things.
No question the DDOGs of the world deserve a better multiple than just about everyone else.
But if everyone else experiences multiple contraction…well…where does it all stop?
Is “8” or “10” or “12” or “15” the new 20, when it comes to P/S? No idea. Maybe 20 stays 20.
But what gives me pause is all the companies that have continued to be good/great companies that have been discarded once hypergrowth slowed: twlo, okta, zm, etc… maybe AYX and FSLY only examples of where things kind of fell flat in a hurry. But twlo, okta, zm and others, despite continually higher and higher revenues, albeit at slower growth rates, have all been brought down to Earth. “duh…hyper-growth commands the higher multiples, dreamer!”. Ok, but what is the thought process, then? That they will miraculously grow at hyper-growth for a decade? Or even 5 years? Has that ever really been done often in history?
Point is that in a happy happy bull market, no one cares.
I think we need these suckers to get low enough that we can get a great CAGR in just getting back to 2021 May levels. If I see that, I am pouncing.
Do you think a recession is in our future? A depression?
IF all the mighty, high flying, world changing, cloud-based, High Growth companies get reset to their absolute lowest, or whatever the most negative or common sense investor might determine, is their common denominator ‘value-based multiple’ - then couldn’t a ‘fairly’ resonable high flying, world changing, cloud-based, High Growth company investor expect that the horse race begins again from that very low point and those with the ‘bestest’ of the highest flying High Growth would trend higher from there outpacing the mere mortal companies - which in turn would propel their multiples higher?
Or - does it follow that once whatever the lowest common denominator value multiple is reached - then regardless of performance the market will keep the best comapanies in a choke hold and all multiples will remain the same? I’m a little fuzzy on the exact math but I believe that the best companies through performance will always trend to higher multiples and the average Joe investor is one of the reasons for that.
Growth will be back and the common Joe investor is among the reasons.
Do you think a recession is in our future? A depression?
I have no idea.
I believe that the best companies through performance will always trend to higher multiples…
Multiples for Cloud companies have always been higher. What happened in 2020 is they got ginormously higher than they’d ever been. Like projecting Anthony Davis at age 29…
Warren Buffett says that trying to distinguish between growth and value is fuzzy thinking.
But that’s a discussion for another day. There’s no doubt the market will pull another bender.
I have no idea when.
Ears <moving to the far end of the dinner table, having overstayed his welcome>
A few years back the All to Lovely and I picked up some of her family in LAX and decided to take them on a tour of the California coast via HWY 1. Absolutely beautiful drive that we have done a number of times and every time some new relative comes in. Tradition and all.
Anyway…on this particular drive we decided to tour the Hearst castle - which we did. While on the tour the guide told a story about a famous Hollywood actor that overstayed his welcome and - as was the custom - kept getting moved further and further down the table. I forget who the actor was but his quote on it all was that he finally took the hint and left because if they moved him any further away he would have been sitting in the fireplace.
So when I read your post I just chuckled.
But nothing could be further from that story here. Your advice and comments are always both appreciated and instructive. A person would have to be a total maroon to discard them without some careful thinking; however, yours did leave me with a dilemma to wit:
I am a definitive concentrated portfolio High Growth investor.
My investing methodology/strategy and general hypothesis has been developed via hard lessons learned and a definitive stubbornness which I attribute to a North Star, compass like mentality set amid the undeniable and completely non-predictive tumult and chaos of the markets. All this under the general premise, if not promise, that the markets will come back - just as they always have come back. So I RTHG and Hunker Down best I can with the ringing in my ears a surety that human nature being human nature will always be human nature; which is to say, that The Sterling Silver of the High Growth companies will be priced higher than the also-rans of the market. Or something like that.
I got Saul on one side assuring all that this time is different and that…besides, stay fully invested and eventually everything will be alright. I admire Saul and think him one of the ATGreats of this High Growth stuff. What could possibly go wrong.
Then I got Ears - whom I have a great deal of respect for, as a total common sense and precision analytical, analytics, analyzing guy who happens to know stuff - waving the caution flag.
I got several of the services I follow - one primary one in particular, who feels as I do (Or perhaps I just feel as he does) that what we are experiencing now is a great re-set tsunami that sweeps the beach areas completely clean (my words) leaving some of the best beachfront buying opportunities we have ever seen for Cloud-Based companies that are changing the world.
I got Dreamer - another guy I respect, who is a pretty smart guy who feels just like Ears. Smart folks should weigh these things to make sure their very own investing theory is plumb.
Now really…with all that what in the world is an amateur investor like me supposed to do? And top that off with the fact that we are already at least half way (I think 2/3 down that road but what the heck do I know) correction path and am so committed to my own myopic strategy that it would be completely futile and foolish to just throw up my hands and say, “Oops - never mind”. Much less because despite all the smart folks, including Dreamer and Ears, putting up the sharks flags - I still think human nature and greed will win out in the end.
But…moving to the end of the table? Not even close: you and the Dreamer would always be honored guests at my table. Dinty Moore Beef Stew and all or perhaps a really nice Hedgehog Goulash:
…with all that what in the world is an amateur investor like me supposed to do?
Keep doing what you’re doing.
I should have made it clear that I wasn’t suggesting you change anything. I was reacting to the
belief that these firms are cheap right now. Maybe they are, if you use 2020 as your benchmark and
ignore what happened in the seven years before 2020. Think of me as that bothersome little angel on
your right shoulder reminding you that our minds put more weight on the most recent results and
anchor on the highest price.
