Don't ever ignore what the market is telling you.
This is a concept I have seen investors ignore for my 25 years in the market. The market isn't always right, but usually it is. I learned that over the many years. I never discount what the market is trying to tell me.
This is a concept I have seen investors ignore for my 25 years in the market. The market isn't always right, but usually it is. I learned that over the many years. I never discount what the market is trying to tell me.
1/ I made a lot of money over the years picking a few great companies long before anyone else ever knew who they were. That doesn't mean the market was wrong. Many times I see people load up on all these "cheap" companies.
2/ Those companies that are trading at $800 million or so when the rest of their peers are $3 to $10 billion. These companies aren't this cheap because the entirety of millions of investors around the world are clueless.
3/ When a company is too cheap, I stand up and pay attention. The market is clearly trying to tell me something. If am really paying attention and unbiased, I can often see why. It doesn't make the company broken, but it makes it very high risk.
4/ I often find thought those companies are more likely to fail on me, and I keep them small for good reason. Many people will say I chase all the bubbly names, but that is the cost of buying great companies.
5/ Great companies don't get cheap unless a wider market crash comes along to make them cheap. I often find, if I look hard enough or wait long enough, the reason expensive companies are expensive and cheap companies are cheap eventually appear.
6/ I see it happen way too often. The companies I buy that are really cheap end up with a bad management or the science doesn't work out. Sometimes I don't even see it like a better competitor out there lurking. You don't even know till its too late.
7/ When a company seems too cheap, I see most people get all fanatical as love a good deal. They find reasons to love it when the market is telling them clearly something isn't right.
8/ I suggest you take the time to at least try to understand what the market is telling you because more often then not, those companies go bad vs the companies everyone just loves.
9/ Sometimes you just get what you pay for. Sometimes it pays you to listen to the critics. They often have good points.
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