Is it better to be 1) wrong and move on, 2) right and hang on or 3) wrong and hang on?
Please allow me to explain how the first two are near equal but the latter is the worst outcome possible. This has consequences in how you may invest, linger on failing stocks and how better results are achievable by following this basic principle.
I have opined a few times in the past that I believe Saul’s great results have less to do with his stock picking and more to do with his ability to move on…unemotionally move on. While he may disagree, I can see him trading away from winners from time to time, rejecting clear winners from time to time…yet he still produces spectacular results.
As an illustration, consider my experience with TWLO…first and most importantly, congratulations to the TWLO longs…you done good!..you were right and you hung on. Me?..I was wrong and moved on.
Who did better in their investments???..the answer may surprise at least a few.
From time to time, I like to go back and see what I was thinking and concluding about stock investments (whether long or not) to assess how I was correct/incorrect on assumptions and expectations for a particular stock. IMO, this sharpens future stock analysis by reducing repetitive errors in judgement as the years go on and previous detailed decisions are but a mere blur in time…therefore destined to otherwise repeat faulty logic.
With TWLO’s recent jump, this seemed a good time to review that assessment from 2016 here:
I really didn’t care for that secondary because it wasn’t for the benefit of the company…that money essentially given away to insiders. I suppose you could argue otherwise but if I had been a shareholder back then and saw my investment tank from $70…for no benefit to the company I was invested in…that would be a bit irritating and IMO, suggests a loyalty to insiders and not the average shareholder.
But that said, the link I posted from the NPI expressed my gut instinct. Looking at videos of the CEO, just not comforting in terms of eluding conviction and planning and strategy.
The concern about whether there is really a moat or not regarding their technology…I am still not sure what a “supernetwork” is…and this was expressed as their sole moat.
Switching costs do not appear to be as high as we might have thought according to KTCFOol who has worked with Twilio (as you see in that thread). So customers do not seem to be as locked in…although Tinker has made some reasonable counter arguments.
Under any circumstance, I wouldn’t be holding now because I am not sure about that lockup expiration. This is a very volatile stock…and sometimes they make make look you foolish as much or more than intelligent.
Since that post, the stock is up 150%!..I was wrong and moved on. Remember that some folks had bought in at the $60-70 range…those that held are barely up at this moment.
But…I didn’t lose any money and what did I do with what otherwise had been invested in TWLO:
SQ…a bit over a triple.
AAXN…a bit over a triple.
We have all had great investments for sure…but what we also must recognize is that we can’t own every winner. And very importantly…there are in fact many potential winners.
So of the above three options that any of us have, which one statistically would be the worse decision to make:
- Wrong and move on…OK, I missed the TWLO 150% rise…but my money was not stagnant and successfully sought opportunity.
- Right and hang on…OK…that is you TWLO folks.
- Being wrong and hanging on…that would be disaster, money locked out, lost opportunity.
The worst decision by far is the latter…IMO, never ever ride a stock down and hope for recovery. That is lost opportunity. You have seen Saul reverse quickly on NKTR…seems a distant memory…didn’t linger, didn’t cry…just moved on to other opportunities.
I missed TWLO…didn’t hurt me at all…went for other opportunities. Saul hates TDOC…I am now up 150%…so what, Saul has found other opportunities.
But if one rides a DDD down to ashes…that is opportunity lost forever.
So as I review the previous TWLO assessment, there is no question I made the correct decision…because of the three, there was only one that was disaster.
It is hard to imagine that anyone is riding any losses in this amazing market but in case you have a straggler or two, perhaps some reflection of the validity of this observation might be helpful. None master its principle so well as the man who sheppards this board.