Finance / Investing Insights that I have Learned in the last 7 years on Fintwit:

1) In investing there is always a soup of the day. You should always ask what it is but never order it.

2) Over a lifetime if you want to grow your wealth you either need growth, leverage, and/or dealmaking skills. Very hard to build wealth without any of these three.

3) When you start investing the first thing you should do is copy the most successful investor, when that doesn’t work at least you will have learned why not.

4) Finding what investment strategy works for you best and finding the best investment strategy are not the same thing. Find the first and move it towards the second overtime.

5) Being sector specific just implies your knowledge of one specific sector is high thus improving your odds of successfully investing in that sector. You can be a generalist and gain the same level of knowledge but you can’t know all sectors. Pick a few.

6) Buying good companies when the market takes one bad earnings report and extrapolates it out into the future forever is usually an effective buying strategy.

7) Dollar cost averaging is a mixed bag. In situations that you decide warrant additional investment carefully add. If you decide not to dollar cost average, it’s better to cut your losses entirely and move on.

If you don’t want to buy more at a lower price, you should sell.

8) Business models are important. Looking at everything through a single lense can cause big investing mistakes. Their are business models that are extremely good (Towers, SaaS) and extremely bad (Airlines, Oil & Gas), knowing why is important.

9) Shorting is hard. There are two kinds of shorts that I have found work well. 1) Potential frauds or regulatory / legal issues that turn out to be true, 2) Pumps of the day ie obvious bubble stocks.

10) Don’t ever short on valuation alone. High Valuation is generally a good characteristic of a short target, but you need more: bad earnings, change in the business, declining growth, technicals

11) Knowing when to press a short is maybe even harder than just finding a short, but if you do it effectively it makes shorting worthwhile. Usually I use options to press my shorts and they need to be managed tightly.

12) Not everything is priced in, and actually stuff that is not relevant or not true is also priced in. Use your own research and intuition to determine what the value is and it doesn’t matter what the market has “priced in”.

13) There are new impacts from the rise of passive investing and ESG mandates that can create weird market dynamics. These impacts are most noticeable at times of major change: near bankruptcy, new IPOs / SPACs, spin-offs, etc.

14) Don’t sell uncovered calls. Just don’t do it. The risk is enormous verse the potential returns. If you want to sell calls, fine, just hedge them by buying the underlying shares.

15) Gamma hedging is a huge real phenomenon driving more stock prices than historically due to the options volumes on certain stocks driven by retail options trading volumes.

16) If you find a bubble, the first thing to do is go long, not short. If you’re a close watcher of markets, you are likely early enough to enjoy part of the ride.

But be prepared for when the bubble bursts and head for the exit quickly, or flip it short.

17) Calling tops in a bubble stock is actually simpler than you think.

The best way to call a top is just wait for a blowoff top. It looks like a mountain peak.

Also when everyone is talking about a bubble, it usually means it’s already pulled in everyone.

18) If you want to avoid taxes, hold stocks for a long time. If you want the stocks you own for a long time to appreciate the most in value they need to grow.

Less Taxes = Buy and hold amazing growth stocks.

19) Terminal value is it. It’s all that really matters. Buy stocks that can grow their terminal value over time and hold them.

20) Don’t be afraid to ask a stupid question on Fintwit. Just remember there are no stupid questions, only stupid people.

21) Margins matter. Gross margin is the hardest margin to change. High gross margins are extremely attractive because they can scale much better.

This is a reason why scale matters more for software than for selling cars.

22) Understanding why accounting is the way it is and why it might make sense to avoid making any earnings for some growing companies makes sense.

23) Every once in awhile the market is giving away free money. It’s those points in time when you get a feeling like, “how could this even be possible”. It happens very rarely, and the more times you see it, the better you are at identifying it.

When it happens, be greedy.

24) Avoiding the big loses is the most important thing to improve your performance. A big loss can ruin your year.

I’m still working on how best to avoid this, but so far I have found no magic formula. You need to do everything well to avoid big loses.