I glanced at several posts today discussing todays little pullback specifically using words like “discount” or “on sale” or “missed the lower prices”.
I do find these to be interesting choice of words especially since they likely demonstrate some element of price anchoring…usually to previous highs rather than previous lows. Bull markets of course never relentlessly go up and we have had an amazing year in 2017.
But there can be danger in price anchoring and defining a stock’s value based on its previous high and then grabbing every chance to buy more with every dip (or as they said in 2000, “catching a falling knife”).
Look at a few of the stocks followed here at Saul’s board regarding their returns YTD in 2017 AFTER this “discount”:
SHOP - up over 100% YTD
ANET - up over 100% YTD
Sq - up over 150% YTD
LGIH - up over 100% YTD
HUBS - up over 50% YTD
TLND - up over 70% YTD
NVDA - up over 80% YTD
NTNX - up over 25% YTD
WIX - up over 10% YTD
UBNT - up over 15% YTD
Now ask yourself with stocks up by these amounts YTD…when these stocks drop by 6-7% on a day like today but are STILL up by these amounts…how does that become a “discount”, “on sale” or a major buying opportunity???
IMO, one cannot use such value based attributes to stocks that have mostly had moon shots this year…some sitting at or near historically high P/S ratios (SHOP).
Sometimes, the best action is no action or even trimming, in case truly discounted stocks present themselves…but I really don’t see how the above vernacular fits into a little drop compared to the gains already logged in this year.
We heard the same lingo in 2000 and again in 2008…when many bought too early thinking their highs would soon return…just say’n…“value” should have no price anchor.