1/9 When Covid sell-off happened, I wrote down a few things on twitter which I still read from time to time. Always instructive to re-read what you're thinking when the market was under fire.
So here goes some thoughts.
So here goes some thoughts.
2/9 This correction is likely to be more challenging psychologically than Covid drawdown, especially if the pace of drawdown doesn't die down and bottom doesn't appear in the next couple of months.
Everything was down during Covid.
Everything was down during Covid.
3/9 You could tell yourself it's "okay" to not have pandemic in your scenario. I think a lot of the people may not be so forgiving to themselves this time.
They may introspect "what was I possibly thinking when I paid >50x sales?"
They may introspect "what was I possibly thinking when I paid >50x sales?"
4/9 I wonder whether in the post-social media world, the pace of drawdown (4Q'18, 1Q'20, and Jan'21 so far) has fundamentally changed forever. This makes high margin debt (even at a very low borrowing rates) particularly unpalatable in this world.
5/9 Most people are hardwired to be on the right side of the narrative all the time and when the narrative flips, most people want to escape to be in "consensus narrative".
6/9 6 months ago, a lot of people would identify $SHOP as one of the likely trillion market cap companies in 10-15 years. And if you were incredulous, you were seen as missing the forest for the trees.
7/9 Now that stock is down 40% in a month, many people are clamoring over the valuation multiples. The "forest" can become a barren desert in no time.
Companies in the "growth" land is almost indiscriminately down ~50% or more.
Companies in the "growth" land is almost indiscriminately down ~50% or more.
8/9 Of course, not all of them will prove to be deserving of such drawdown. Perhaps it's increasingly becoming a better environment to find some great future compounders.
Time and again, it keeps coming back to first principles.
Time and again, it keeps coming back to first principles.
9/9 As Terry Smith says: buy great companies, don't overpay, and do nothing. The "do nothing" part is probably going to be more ridiculed and questioned in this environment.
I only wish three things to be a good investor: a thicker skin, a better stomach, and an average brain.
I only wish three things to be a good investor: a thicker skin, a better stomach, and an average brain.
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