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1/ How to think about a stock that is recently up BIG
A
about my personal history with Anchoring Bias
With $DMTK, $FVRR, $NVCR, $ZM
A
about my personal history with Anchoring BiasWith $DMTK, $FVRR, $NVCR, $ZM
2/ What is anchoring bias?
When the first price that you see influences your future opinion
Ex: I offer you a piece of gum for $0.10. You decline
You change your mind, but the price is now $0.50
Do you buy?
Probably not -- you are 'anchoring' to the original $0.10 price
When the first price that you see influences your future opinion
Ex: I offer you a piece of gum for $0.10. You decline
You change your mind, but the price is now $0.50
Do you buy?
Probably not -- you are 'anchoring' to the original $0.10 price
3/ This comes up ALL THE TIME with investing
$ZM came public at $65 in 2019
Current price: $426
Is it a buy today?
Should you wait for a pullback?
It's really, really hard to convince yourself to pay 8x the price for a stock!
$ZM came public at $65 in 2019
Current price: $426
Is it a buy today?
Should you wait for a pullback?
It's really, really hard to convince yourself to pay 8x the price for a stock!
4/ Anchoring bias is a big problem for me
I didn't buy
$ABMD at $80
$CRM at $40
$SHOP at $50
$ZM at $100
because "they were already up so much"
I was anchoring to previous prices, NOT looking at them with "fresh eyes"
ALL have multi-bagged since I initially passed
I didn't buy
$ABMD at $80
$CRM at $40
$SHOP at $50
$ZM at $100
because "they were already up so much"
I was anchoring to previous prices, NOT looking at them with "fresh eyes"
ALL have multi-bagged since I initially passed
5/ @DavidGFool is a MASTER at overcoming anchoring bias
It's like a superpower!
He has recommended buying numerous stocks that DOUBLED in the weeks BEFORE his recommendation!
Like $AMZN in 1997. That worked out OK.
@RBIPodcast is fantastic! https://www.fool.com/podcasts/rule-breaker-investing/2021-02-10-blast-from-the-past-vol-5
It's like a superpower!
He has recommended buying numerous stocks that DOUBLED in the weeks BEFORE his recommendation!
Like $AMZN in 1997. That worked out OK.
@RBIPodcast is fantastic! https://www.fool.com/podcasts/rule-breaker-investing/2021-02-10-blast-from-the-past-vol-5
6/ I still struggle with anchoring bias, but I'm getting better
My personal history with $NVCR is a success story at overcoming my problem
My personal history with $NVCR is a success story at overcoming my problem
7/ I first learned about $NVCR in 2016
The tech seemed interesting but VERY high-risk
I didn't buy - I watched
By Oct 2016, bad news sent the stock down to ~$5
I remember thinking "there's still potential, might be worth a shot at these levels"
The tech seemed interesting but VERY high-risk
I didn't buy - I watched
By Oct 2016, bad news sent the stock down to ~$5
I remember thinking "there's still potential, might be worth a shot at these levels"
8/ I didn't buy at $5
a few months later GREAT clinical news came out
Shares rose 57% in a single day!
Quickly, the stock was up to $14
(Here's the news, in case you are interested)
https://www.fool.com/investing/2017/04/03/heres-why-novocure-ltd-is-skyrocketing-today.aspx
a few months later GREAT clinical news came out
Shares rose 57% in a single day!
Quickly, the stock was up to $14
(Here's the news, in case you are interested)
https://www.fool.com/investing/2017/04/03/heres-why-novocure-ltd-is-skyrocketing-today.aspx
9/ The old me: "I'll wait for a pullback"
Thankfully, I bought it at ~$14 anyway
Hard to do when I could have bought at $5 just a few months earlier!
My logic: At $14, the market cap was ~$1 billion. If this works, it could be $10+ BB someday https://twitter.com/BrianFeroldi/status/885971918393933825?s=20
Thankfully, I bought it at ~$14 anyway
Hard to do when I could have bought at $5 just a few months earlier!
My logic: At $14, the market cap was ~$1 billion. If this works, it could be $10+ BB someday https://twitter.com/BrianFeroldi/status/885971918393933825?s=20
10/ $14 turned out to be the LOWEST PRICE since then
Even though it was at the 52-week HIGH at the time
$NVCR is now $179, a 10+ bagger since I bought "at the high"
Even though it was at the 52-week HIGH at the time
$NVCR is now $179, a 10+ bagger since I bought "at the high"
11/ More recently, I did a deep dive on $DMTK on Sept 30, 2020
Price at the time: $12
I said "wow, if this works, it could be huge"
I haven't bought it yet. Here's what happened since:
Price at the time: $12
I said "wow, if this works, it could be huge"
I haven't bought it yet. Here's what happened since:
12/ I could have bought $DMTK at $12
$12!!!!!
The price is now $67
$67!!!!!!
Hard to buy now, isn't it?
I may still buy -- I haven't decided yet!
The market cap is <$2 billion. 10x returns from here still possible!
I'm going to fight my desire to anchor like crazy!
$12!!!!!
The price is now $67
$67!!!!!!
Hard to buy now, isn't it?
I may still buy -- I haven't decided yet!
The market cap is <$2 billion. 10x returns from here still possible!
I'm going to fight my desire to anchor like crazy!
13/ Another ex: $FVRR
The stock was $22 in March 2020
@TomGardnerFool recommended it in Sept 2020 at $116 -- up 5x in 6 months!
I didn't buy. Took a harder look in Oct 2020 -- but the price was now $159 -- an all-time high
I bought anyway
Current price: $294!!!!
The stock was $22 in March 2020
@TomGardnerFool recommended it in Sept 2020 at $116 -- up 5x in 6 months!
I didn't buy. Took a harder look in Oct 2020 -- but the price was now $159 -- an all-time high
I bought anyway
Current price: $294!!!!
14/ Why did I buy $FVRR even though the stock was up already up huge?
Market cap was only $5 billion at the time
I thought 10x returns were possible https://twitter.com/BrianFeroldi/status/1337778933748600838?s=20
Market cap was only $5 billion at the time
I thought 10x returns were possible https://twitter.com/BrianFeroldi/status/1337778933748600838?s=20
15/ Anchoring bias is HARD to overcome
It's counter-intuitive to pay so much for something that's up big recently
Now, to be clear, YOU SHOULDN'T JUST BUY A STOCK BECAUSE IT IS RECENTLY UP BIG
You need to due research & measure the opportunity from the CURRENT price
It's counter-intuitive to pay so much for something that's up big recently
Now, to be clear, YOU SHOULDN'T JUST BUY A STOCK BECAUSE IT IS RECENTLY UP BIG
You need to due research & measure the opportunity from the CURRENT price
16/ But, if you find a GREAT company and you still think it can grow
Don't let the recent price movement keep you from buying!
Here's what I mean by "a GREAT company" https://twitter.com/BrianFeroldi/status/1324359239469588485?s=20
Don't let the recent price movement keep you from buying!
Here's what I mean by "a GREAT company" https://twitter.com/BrianFeroldi/status/1324359239469588485?s=20
17/ My thinking on investing has hugely evolved over time
My favorite investing thesis today boils down to:
"This great company will stay great for a long time."
My favorite investing thesis today boils down to:
"This great company will stay great for a long time."
17/ You don't have to go "all-in" right away, either
If you like it and its up big
But some right away
Try to make future buys at "better value points"
What does buy at "better value points" mean? https://twitter.com/BrianFeroldi/status/1275752033325330433?s=20
If you like it and its up big
But some right awayTry to make future buys at "better value points"What does buy at "better value points" mean? https://twitter.com/BrianFeroldi/status/1275752033325330433?s=20
18/ Remember investing is a never-ending battle in your brain
Don't let your emotions & baises get in the way
Don't let your emotions & baises get in the way
19/ And remember to always watch the business, not the stock
20/ Thanks for reading
Like these graphics?
I email them daily for free http://brianferoldi.substack.com
Like these graphics?
I email them daily for free http://brianferoldi.substack.com
