Successful investors take inspiration from others, not follow their advice verbatim. We always emphasize that we’re not here to give advice on what you ought to hold or not hold. We’re here to tell you how we arrive at our own investment decisions while providing actionable insights along the way. When we “love” a stock, that means it can be found in our own tech stock portfolio, which constitutes less than 18% of our total assets under management. Occasionally, we’ll receive an email like this from a subscriber.
- I sold <STOCK A> months ago because you said to avoid it, but the stock price has been going up. Why do you like <STOCK B> but say to avoid <STOCK A>?
The first part of that question reflects an investor who does not actively manage their portfolio, but instead listens to others for advice. They confuse short-term price appreciation with the quality of a business, something that rarely helps one sleep well at night. The last part of that question is valid enough – why do we prefer one stock over another? Usually, it comes down to risk.
As risk-averse investors, we’re more concerned with not investing in landmines than we are with betting on every single growth story out there. We’re willing to sacrifice some upside in favor of avoiding lots of downsides. One way to keep our emotions at bay is by establishing ground rules that help curtail risk. For example, our disruptive tech investing methodology doesn’t allow us to invest in companies with a market cap of less than one billion dollars. Even if we really like a company, we won’t go long if they’re too small, or too richly valued according to