Despite some recent rumblings, markets are near all-time highs. Even so, quite a few popular picks have turned sour in the last few months. The latest ones for an international audience have been Altice USA (ATUS), Alibaba (BABA) and a Northern sawmill trade. For fellow Swedes, Kambi had a really rough day during the summer. I’m sure that there are a thousand more examples in the momentum retail space, but those are some that I have kept an eye on.
I usually prefer concrete stock pitches to meta-posts about investing (unfortunately a lot of writers do the exact opposite) but I'll make an exception for this one. Well-written and I completely agree. You once told me: "you can't borrow conviction" and I think that quote is spot on. If you borrow a stock pick it is very tempting to take a few shortcuts with your due diligence. You think: "I don't need to write this down, it's already in this blog post", "I'll try to model this later", "I'll just copy this lists of key risks the author came up with", etc. And so often that approach will come back to haunt you. It can be when your stock is up 20%, down 30% or flat for two years. But suddenly things happen and you figure out that you actually don't understand the situation that well and you don't know what to do or why you own the stock in the first place. Also, it is my experience that if you borrow an idea you often get the sizing wrong - you do it too small because you lack conviction or you do it too big because you don't understand the risks.
Finally, to stay on theme with the name of your blog, I think you can also invert this line of reasoning. Borrowing a stock pick is dangerous, but lending out stock picks is often beneficial. When you write a blog post or forum post about a stock you can't take any shortcuts. You are forced to do sufficient due diligence and write down your thoughts and numbers in a structured manner because you'd look like an idiot otherwise. Sometimes you write something and you think "fuck me, how do I explain this?" and you end up understanding that you fooled yourself into believing that you understood something when in fact you didn't. Also, if you do make honest mistakes in your work and share it with smart people, they are often kind enough to point out your mistakes.
I usually prefer concrete stock pitches to meta-posts about investing (unfortunately a lot of writers do the exact opposite) but I'll make an exception for this one. Well-written and I completely agree. You once told me: "you can't borrow conviction" and I think that quote is spot on. If you borrow a stock pick it is very tempting to take a few shortcuts with your due diligence. You think: "I don't need to write this down, it's already in this blog post", "I'll try to model this later", "I'll just copy this lists of key risks the author came up with", etc. And so often that approach will come back to haunt you. It can be when your stock is up 20%, down 30% or flat for two years. But suddenly things happen and you figure out that you actually don't understand the situation that well and you don't know what to do or why you own the stock in the first place. Also, it is my experience that if you borrow an idea you often get the sizing wrong - you do it too small because you lack conviction or you do it too big because you don't understand the risks.
Finally, to stay on theme with the name of your blog, I think you can also invert this line of reasoning. Borrowing a stock pick is dangerous, but lending out stock picks is often beneficial. When you write a blog post or forum post about a stock you can't take any shortcuts. You are forced to do sufficient due diligence and write down your thoughts and numbers in a structured manner because you'd look like an idiot otherwise. Sometimes you write something and you think "fuck me, how do I explain this?" and you end up understanding that you fooled yourself into believing that you understood something when in fact you didn't. Also, if you do make honest mistakes in your work and share it with smart people, they are often kind enough to point out your mistakes.