I don’t attempt to call bottoms. But I used Greg’s search site to find the last time I used the word “indiscriminate” on the board. Yep – March of 2020. https://discussion.fool.com/what-i39ve-done-this-week-34433686.a…
Just like then, the good is getting sold just like the bad. No one cares about the specifics of the company. Just what “kind” of company it is. Tech? Sell. SaaS? Sell. The market doesn’t care if it’s Datadog or Skillz.
As I said a little over 2 years ago, if you’ve been waiting for a buying opportunity, this is it. Here’s how much a few of my favorites are off their 52-week highs:
Datadog -51%
ZScaler -65%
Bill.com -73%
MongoDB -60%
Snowflake -67%
SentinelOne -75%
Cloudflare -75%
Zscaler for example was up around 55b back in November. It’s under 20b now. I’m not saying that either is “correct.” But we each have to decide what it’s worth and make our buys or sells, adds or trims.
My take? The only possible reason for selling (or frankly, even for not buying) here is fear. You may believe the fear is warranted. That’s fine. But think hard. Think about how companies have bounced back in the past, even in hard times.
Look, this post isn’t complicated. I’m not going into a deep dive into what pullbacks look like, interest rate impact, inflation, or even recession. This is simply a reminder that the best companies will prevail. I don’t care if you have a different list. I’m just trying to keep my head on and realize where we are at.
Bear
205 Likes
My take? The only possible reason for selling (or frankly, even for not buying) here is fear. You may believe the fear is warranted. That’s fine.
I think the reason for fear is lack of experience/education, as well as a slightly different take: Another reason is that even smart, confident people simply think they can call bottoms, which is what believe frequent money moves are about. Non-LTBH investors aren’t necessarily “fearful” when they sell into cash or sectors that are doing better, they’re making a judgment that they’ll lose less/gain more by making those moves. In fact, I’d venture that the people who feel the most stress in a down market are (a) those who get paid to manage money for others and have to answer the phone when unhappy clients call, and (b) those who need to sell now for some reason and stayed too long in risky/volatile stocks. In one sense, those are just two different versions of “playing the market”, or “gambling”.
But think hard. Think about how companies have bounced back in the past, even in hard times.
Not only that, think about how long it’s taken. In “hard times”, I don’t move stuff around much because at my core, I’m still a LTBH investor. I held AMZN for about 10 years and still hold most of my NFLX shares from around 2010-11, as part of my desire to NOT keep all of my stock stuff in SaaS companies. The question I ask when it feels like good stocks are beaten down is closely related to the Indiscriminate Selling concept: “Who has their slingshot stretched the tightest?” Put another way, it could be, “Which beat-down companies are built to not only weather the storm but grow 10x or 100x when it’s over?” One thing history has taught us: what you just told us to think hard about is the north star of investing one’s own money without fear.
-n8 (long DDOG, ZI, ZS, SNOW, UPST, and MDB of those often mentioned here)
23 Likes
So I want to add to this, but hey are we not getting into OT territory here?
I have been ridiculed at times for having faith in the CNN Fear and Greed Index. It helped my immensely at two very important bottoms since I discovered it. The two times it hit an historic low in the last 4 years was on the last day of trading in 2018, which was the exact bottom, and then within a couple of days of the March 2020 low.
Well today, right now it’s at 6, the lowest it’s been since March 2020. Within three points of those two historic lows. That’s close enough for me to start moving some cash in right now. If it hits 3 again, I’m moving much further in. I’ve been adding along the way since early December, went heavy cash last November. It’s of course been a painful 6 months, but only half as bad as it could have been. I’m not a market timer at all, but hated all the high fives, and overly confident predictions of a year end rally.
So I’m not smart enough to say we are close to a bottom, but I’ll listen to what this indicator is saying as it’s track record for calling the last several bottoms has been very accurate. I at least have to start moving in here just in case.
Best to all. TMB
74 Likes
I can’t delete all the OT posts, and I haven’t tried because there are a flood of them right now, and understandably so with all the anxiety we are all undergoing, but I will continue to delete posts that focus on valuation in detail.
And if anyone would like to hear a bit of speculation about a light at the end of the tunnel, I think that the huge drops in all the market indexes (as well as the even huger one in tech stocks), mean that this may be over sooner than one might expect. Why?
Because everyone investing in the stock market in any way now feels a lot poorer, and more like saving his or her money for an emergency instead of spending it on purchases, meaning fewer purchases of goods, cars, houses, new factories, new equipment, fewer new jobs, etc, meaning that there will likely be both suddenly less growth in the economy, and suddenly a lot less inflation, meaning that the Fed will have to stop or slow raising interest rates, or possibly even make small cuts, which means less scare about high interest rates, etc, etc.
What to look at will be sequential changes in inflation, not year over year. (If this month’s prices are 8.0% higher than a year ago, and the prices don’t go up at all next month, those prices will still probably be close to 8.0% higher than a year ago. But if prices fall 0.3% or 0.5% sequentially next month instead of continuing to rise that will be big news). Again, this is one big imagining on my part, and don’t bet the farm on it. I don’t really know anything about the subject that I’m talking about. 
Saul
70 Likes
Bear made some good points:
-
The market doesn’t care if it’s Datadog or Skillz. [Almost everything is being sold]
-
The only possible reason for selling (or frankly, even for not buying) here is fear. [Actually, there’s likely forced selling going on which is unfortunate for those who are forced to liquidate]
-
This is simply a reminder that the best companies will prevail.
I’d like to focus on the third point. The best companies will survive. The best companies will prosper. The best companies will prevail and ultimately provide great returns from present stock prices (my opinion). Now, the part that’s not easy for all investors is picking and investing in the best companies. I’ve consolidated my portfolio into what I think are the best. It isn’t the best of times for companies to raise capital (stock prices are low so raising capital via equity is much more dilutive and there may not be demand for secondary offerings). Raising capital via debt is also more difficult and more costly with rising interest rates. So, the companies that have lots of cash on the balance sheet and have good and rapidly growing free cash flow will not only have a much higher chance of staying in business for the long-run but they will also have a much easier time operating (hiring and retaining employee, making strategic acquisitions, spending on gaining market share and developing new products and services); in short, they will be able to enhance their competitive advantage rather than focusing on merely staying alive.
In addition, to financial strength, the best companies are dominant in their target markets and are able to exert that dominance into becoming even more dominant. During times like these the strongest grow even stronger. This is the time like no other to be a gorilla and not a chimp.
I now have the bulk of my portfolio in just four companies that I believe meet the above criteria. They are DDOG, CRWD, ZS, and SNOW. I have a few smaller positions, but I’m contemplating whether I should keep them or add more to the big four. Of these four, I’m most confident in DDOG and SNOW. Cyber security has great tailwinds but there’s also more competition. NET is not going after ZS so that should be analyzed and watched. Three (ZS, SNOW, and CRWD) of the four have yet to report their latest result so that could be a risk to the stock price in the near term.
GR
104 Likes
Hi americanray,
this is a sentence from October 2008, written on another famous board for stock discussion:
“This unprecedented worldwide crises is scary beyond belief, and if anyone thinks a worldwide depression is impossible, consider that when the Fed runs out of money, the Treasury will have to start printing it, and the U.S. credit rating will drop. Then what? The DOW hit 8500 today, and tomorrow it should drop to 8,000 or less. I guess if you are willing to wait 5 years for a DOW of 10,000 this is the time to buy. We are a long ways from the market bottom.”
We all know how it turned out now. Nobody knows what the future will hold, but staying optimistic and flexible worked always well for me.
30 Likes
I am surprised no one(may be only one) mentioned that ZoomInfo has got a huge advantage in this market, since companies would want to increase their sales by getting all the meaningful contact information in companies, which ZoomInfo readily provides.
The stock movement of it currently does not reflect that either, and I wonder why.
Any insight/opinion on this behavior too, would be appreciated.
1 Like