Three of my best performing bets started off as duds, until they broke through and outperformed the market.
In the previous article, we looked at the main difference between the 1990 dot com bubble and today’s market.
Fast Forward to Today
These days, I am relieved when a company reports strong earnings but their shares tumble, as it points to some semblance of market rationality, instead of the irrational exuberance that became synonymous in the 2000s. Don’t get me wrong, there are pockets of exuberance (SPACs, crypto, etc).
Indeed, the recent valuations had ballooned over the past year to levels that were not sustainable, so when solid earnings reports for high-flying stocks are met with investors taking a breather, it’s not a bad thing.
I’m no Cathy Wood / ARK, I have two portfolios: one is managed by investment professionals and in more safe, conservative holdings. The other is a self-directed portfolio which makes:
a) bets on fairly speculative tech and digital media companies that probably don’t meet a more conservative investment criteria but at market capitalizations of under $50 billion can grow into $100 billion – $500 billion dollar businesses thanks to their leadership in markets and the boundaryless, global nature of the Web;
b) larger (relative to the professionally managed fund) long-term investments in “blue chip tech firms” like Google, Amazon, Apple, etc.
c) bets in IPOs that may be volatile in near term but in 5-10 years could go to $0 or be worth 10X.
Of note, some of my biggest winners in 2020 – Enthusiast Gaming, Snap, Chicken Soup for the Soul – all fell after my prescient bets, before taking off like a rocket ship. Snap is a good example of a post-IPO stock that needed gelling, before blasting off.
I discussed my investment in Snap on ContextTV in April/May 2019, here’s what happened next:
Ditto Chicken Soup for the Soul, which I expanded on more recently but got in in March 2020:
In other words, sometimes it’s better to get in early on a company, even if it means the stock will fall in price… than getting in after a stock’s meteoric rise, risking you being left holding the bag. Now granted, 2020 was a unique year where asset prices rose across the field… so some of this should be chalked up to both luck and general market tides lifting many boats.
Disclaimer: Nothing here should be misconstrued as investing advice. I am NOT licensed to give any advice. These writings are intended as entertainment to put into context how a media entrepreneur and investor thinks, given my unique time horizon and risk profile. Educate yourself, read up on mistakes others have made and speak to a licensed professional who can help you based on your investment profile and time horizon. The majority of my holdings are in safer, value stocks and managed by professionals. These investments represent riskier investments that make sense for my time horizon.