What I do on days like today

Investment Analysis Clubs Saul’s Investing Discussions
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When you hold a narrow book, days like this happen. No one likes them, but volatility is part of the game. So we ask ourselves: is today’s action company dependent or is it a macro economic dependent? And that answer might be “both” for some of our companies. But before going any further, I suggest looking at your overall gains first. This might add some perspective to your situation.

My sense is that many, if not most, of our companies are trading lower in sympathy with the overall market, given AMZN and AAPL are down following their earnings announcements (AMZN had a nice quarter, as did LVGO/TDOC, but is getting absolutely hammered as of 12:00p ET). So some investors are perhaps thinking a good quarter is already priced in to some of these companies. And of course investors are concerned with the spike in Covid in parts of our country, and internationally (which is actually a tailwind for some of our companies, though I’d take a vaccine at this point in lieu of future gains associated with COVID). There is also uncertainty around the stimulus (or lack thereof), with many thinking a deal is unlikely before the election. So there are several macro dynamics at play.

What do do though? This is a question each of us must answer for ourselves. If you are unsettled about the action, book some gains and pay the tax. There’s nothing wrong with taking a profit and get a good night’s sleep and then evaluate the situation from the sideline.

If you think this is a short term dynamic, hang tight. This might be a great buying opportunity for one of those companies that you’ve done the research on but thought was just too pricey. Most everything is on sale today.

Bottom line: don’t despair. The gains you had were paper gains anyway. Good news, the losses your are seeing today are also paper losses, until you sell.

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It is easier to endure if your actual cost basis sits way lower from todays levels. But what if you managed to do the majority of your buys just during the recent highs anyways (like THIS guy)?
How does it feel to be making relatively meaningful paper losses on some of the best companies, on your best ideas with high conviction?

It doesn’t feel good. But I had my reasons to buy and stay mostly fully invested. I knew some sort of broader reaction was in the making eventually (this one was super obvious, and will seem even more so in hindsight). No telling if and for how long it continues.

All I have left now is my 10% cash position, but it still leaves me worrying about when to deploy that given Mr. Markets tantrums.

I saw that also some larger players just had bought large amounts of shares of some of our favorite companies, also just before these hiccups began, so I feel a little less dumb about it.

My conviction remains strong, but I have never lost as much paper money as right now. Very much looking forward to peoples’ actions and reports for October, so I can get some perspective. Because I am not selling a single share of anything right now.

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RevTK - I’m in the same boat. I started investing the Saul way starting only in July of this year. I don’t feel the story has changed for any of these companies, therefore I am with you and not selling a thing but to see my port go from +20% to flat in just a couple of weeks doesn’t feel great. My only regret at this point is not having enough cash on the sidelines for buying opportunities like this.

My brain is trying to rationalize the moves we are seeing this week as the companies who have had the COVID tailwinds thus far as taking a beating when my brain says that further increase in COVID cases should spin them further up, especially in light of strong quarters and positive forward guidance. Maybe I am being irrational in trying to rationalize it, but I’ll say this again on the board: I do appreciate posts like this on ugly days because the board tends to get very quiet during pullbacks so having a sounding board is comforting to me. I am LONG in all of my high convictions but may have to just turn a blind eye to the market for a bit in order to sleep.

RetailInvestor22 - still trying to create an iron stomach for volatility.

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In times like these, I look at the bigger picture, my 6 month’s gains, and ask myself if the story has changed. Six months have been phenomenal and these companies are the utilities of future tech.

And they’re just getting started.

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Guys/Gals - the stocks discussed on this board are subject to high volatility, and we are investing for 10, 20, 50 years down the road. The actions of today are completely meaningless. Stocks go down all the time, and multiple 15% - 20%+ drops can be expected, even within the course of a single year. It is ok if that doesn’t align with your investment style or risk tolerance, which is why index funds were created. This board is for the discussion of individual growth stocks, not comments on short term portfolio fluctuations and management.

Brandon

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Each of us may be in a different situation. But I find these days to be a test of mindset.

If we believe we hold solid companies that will continue to grow into the future and are the best place for an investment these become great days to buy if you have cash.

Or just hang tight and enjoy the ride.

The stock market and investing is like life and entrepreneurship…the ups and downs are all part of it. The key thing is learning from the experience so you can make better choices (investment decisions) going forward.

Personally, I’m buying today. I was also buying earlier this week and last week. So yes, I feel the pain for those who have invested near the ‘top’. But that ‘top’ is only the top for now.

We are down from that point…may go down further…but if we’ve selected the right companies they will come back and create a new top. Up and down they go. That’s the ride.

If you can’t stomach that, this isn’t the right market for you. There are less volatile places to put your money…but they don’t offer the higher returns many of us are after.

So what will happen from now? No one knows! Is my decision to buy now a good one? I think so…but I could be proved wrong. I take solace in the thought that if I am ‘wrong’ it will only be for a period of time. As long as I don’t sell, and I’m in the right companies, things will come back and go beyond where they were before.

At least that’s how I’m thinking about it.

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Hello all,

I usually don’t post here much, because i have nothing to add and so much to learn.
Feb 2019, i started investing Saul style and then March happened so did the major sell off and fears of market rotations in September and October 2019.
Needless to say, i finished the year in red, but i learned to live with it.
Now, even after today’s crash my initial investment is up by 200%. yes, you read that right.
Our stocks are very volatile, but they go up as fast or faster than they go down. Just trust the companies are all good businesses, they most had massive beats for their Q3 revenues and will continue to wining the market and executing well, as they have been.
Sit tight and do not stress.

Bella

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Best thing to do on most days of the market is to spend the time to learn more about your positions, like reviewing their investor relation presentations, their call transcripts, write ups about the companies from analysts from MF, or SA or any other source you follow.

Most of the companies mentioned here are highly volatile, but volatility is different than a loss - so no need to look at daily market volatility and worry about it unless there is something fundamentally wrong with an actual stock which you will see if you read more about the company (like AYX drop several months ago). You can’t time the market, but you can expect volatility especially around major events like elections, and this year covid is just an extra “bonus”.

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what to do?

Shut down your mobile and your computer and go do something else more productive.
But no one will do that. We always have in the back of our mind that something must have happened. Things do happen. There are so many people and so many direction they anyone or any crowd could take this. Throw a rock in the water and the flock of bird they will flee. Who threw the rock? was there only one?

tj

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It is easier to endure if your actual cost basis sits way lower from todays levels. But what if you managed to do the majority of your buys just during the recent highs anyways (like THIS guy)?

Try and ask yourself if anything has changed about the company? (instead of the stock). A big no will help ease your mind.

Saul

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Yesterday I got an email from my broker saying that many brokerages have increased margin requirements due to the added uncertainty of election day. That could be the cause of the selloff, specially of our high growth, high volatility stocks. I believe today was the last day for funds to do their year end window dressing. I’ve been expecting a correction for months. This might be it. At least one commenter said that he believes September 2 was the bull’s high.

September for me was phenomenal, the best in eleven consecutive months of gains. It was so good that I transferred some cash out of the portfolio account. Even with today’s drop my portfolio is higher than at the end August.

What am I going to do? Top up my highest conviction position on Monday. Once you learn to overcome your feelings you hope your highest conviction stock drops some more. :wink:

Denny Schlesinger

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Well didn’t wait until Monday, as I am looking hopefully out 2-3 years with these babies. Added to Zm, Snow, Sq, Shop, Nvda and Tdoc. Time will tell. High conviction for me(again, thinking longer term for some) is Zm, Shop, Nvda and Tdoc and the other two aren’t bad either. Time will tell. Onwards as got to take a bit of rough at times. No point in panicking one bit. Gets you nowhere and to those who are sweating somewhat and underwater. Get off your computer now, go and have a drink, enjoy your family and have the best weekend. But when out, wear a mask, social distance and wash your hands.

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It is easier to endure if your actual cost basis sits way lower from todays levels. But what if you managed to do the majority of your buys just during the recent highs anyways (like THIS guy)?

RevTK (and anyone else in this boat) -

You’re never alone. Read this: https://discussion.fool.com/stocknovice39s-end-of-year-portfolio…. It might help.

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Even with today’s drop my portfolio is higher than at the end August.

Down 5.7%, worse day in a long time but even after taking out some cash reserves and my usual monthly expenses the portfolio is $237.60 higher than on August 31. What’s not to like? :wink:

One just has to get used to the volatility.

Denny Schlesinger

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nice job Denny! Take your wife out to a nice dinner with that $237 windfall!

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Stock prices are driven by stock market(50%), sector (40%), and company 10%.

If all 3 are going down, then there’s nothing to do.

If stock market and sector going up while company going down, then it’s time to analyze stock to see if something changed.

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I am an option trader for 10 year until l joined the board last summer. Kinda newbie here. Hope this post can help newbie like myself. The selloff is probably reflecting increased uncertainty of upcoming election result, evident by increased implied volatility.

Several selloff tests since I followed Saul’s investment style. During time like this, I usually go back to read the knowledge base, AND a thread at the beginning of this board, curated by Saul, summarized good articles in first 1000 posts. That was the time they discussed everything from allocation to portfolio management.

I then asked myself:
Does the story change about individual stock? No…usually

Do I know market will go up or down tomorrow? Absolutely No! (Actually it is Saturday…)

Do I have high-conviction stock that I am comfortable to buy the dip? Depends

During the past year, my answer was either do nothing or cast fund to high-conviction stocks. That worked well.

Finally I found it useful to write down your thoughts, feeling, rationale, and action plan at moment like this because you won’t remember it two months later. Next time you get panic, read your last panic action plan, don’t make mistakes twice.

Hope you find this helpful.

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As a rookie to investing, I am very grateful for this board and the knowledge that has been shared. The mindset that I have had previously towards investing versus now has been a positive, humbling and a painful journey of growth. Personally, that is how I have grown. I have read the KB multiple times but yet there is so much to learn.
With the present circumstance , I am taking the opportunity to reinvest on my high conviction positions and focus on the company and not on the “noise”.
I cannot forsee the future but I will act based on fundamentals.

-mike

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Thanks Stocknovice, your experience has been reassuring and is something that I can relate to.

I won’t lie, the last couple of weeks has been somewhat demoralising for me. My portfolio is virtually new this year, and I have had to average into positions as cash has become available. And so like RevTK my average cost price is much higher than most on the board.

One ‘positive’ of the pandemic for me is that I’ve had cash to save; previously I would enjoy spending my money traveling or going out with friends, and living in an expensive city saving cash just hasn’t been a priority for me until recently. But I’ve been pretty much ‘locked down’ since March, which is when I decided to spend time learning about investing properly. Most of my cash injections have come in the last few months, and I have ended up ‘averaging up’ at inopportune moments. I was also slow building up positions initially, as I wanted to ‘average into’ positions, and because I was new I was naturally cautious dipping my toe in at first.

The last couple of weeks has been brutal for my portfolio. I have not even been able to bring myself to check it in that time, even hiding the portfolio value from myself when reallocating from Fastly, although I glimpsed it. After the first couple of weeks in October, my portfolio was up YTD more than I could possibly have hoped for when I started out. I knew an election was coming etc and probable volatility, but I did not trim any shares. Fastly had risen to my joint top holding at 22% and I was contemplating reallocating some, but to where? I watched Zoomtopia and decided I would reallocate there. BAM. The exact moment Zoomtopia finished, Fastly issued their lower guidance. 5 minutes after making my decision, the stock was 30% down, almost 1/3 of my YTD profits gone.

The next ‘mistake’ I may have made was reallocating my Fastly money immediately into other stocks rather than averaging in, to Zoom and Cloudfare, which also then nosedived with the general sell off. It felt like a double whammy (ok holding Fastly altogether would not have done any better). But mistakes are there to learn from, and I’ve made a fair few this year. I had made the mistake of listening to market noise and selling out before I found the board (or any investing community) this summer. For example I had bought shares of Digital Turbine in early April for $4 a share, it recently hit $40 and would have been my first 10-bagger in 6 months (I sold for $11). Similary for Etsy at $35 a share (sold for $65), which at one point hit $150. And others. I have since bought back into both. I wasn’t going to make that same mistake again.

And then the past week the ‘crash’ has continued. I still have not looked, although I know what’s left of my gains are fast evaporating (I am generally aware of the share prices). What is hard to take, is that while many if not most of the board are up +100%/200% or more this year, if this sell-off continues and is unkind for another week or so, I could actually be in a position where I am in a loss this year. How is that even possible? In a year that many are having the returns of their life. And we own the same stocks! What would the point have been of all that work and effort in recent months? Then all these comments about ‘herd mentality’ etc felt like being kicked while I was already down.

And this is where I think it’s important to zoom out and remind myself of the following. 1. I have already been through a few of these sell offs in recent months, for example after Q2 earnings. Each time my portfolio rallied back even harder. 2. We are in it for the long term, these blips really don’t matter along the way, if we are right about our convictions. My portfolio gains are probably only back to where they were a month or two ago.

And 3. mostly importantly of all. Irrespective of what my portfolio shows, I am not empty handed. The learning curve since finding this board has been HUGE. It teaches you an investing education; you need to pay for tuition normally - for example if you wanted a degree from university. Well, we are getting an investing education - for free! People are freely contributing their knowledge, wisdom and experience, and that is invaluable in itself. So I am keeping that in mind, because I know over the long term that is much more important than any $ returns this year. I also realise how fortunate we are to even be in this position at all, all things considered, and that perspective is important.

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Stock prices are driven by stock market(50%), sector (40%), and company 10%.

Not to be argumentative here but I disagree completely with this.  If you think 50% of stock prices are based on the market and only 10% of the prices are based on the company itself, then how is it so many of the stocks discussed here are up exponentially compared to the market?  I think this board and the results everyone posts every month disprove this theory vehemently.  

I'll admit I'm fairly new to this as I've only been doing this six months or so but my portfolio during that time is up roughly 140% compared to the S&P up 14%.  Another portfolio I have is up 21% in the past two and a half months compared to the market being down in that time.  I'm no stock genius.  I listen to the experts here and at PBMM, learn from them, and make decisions after reading about the company - not the market or the sector. 

I do believe as we saw yesterday each price can and often is impacted by the market as a whole but to say 50% compared to 10% based on the company itself, I think that's rather absurd.