The Three Most Dangerous Words in Investing Aren't What You Expect

In today's Masters Series, adapted from the August 26, 2023 issue of the Empire Financial Daily e-letter from his former firm Empire Financial Research, Whitney explains why a stock hitting new highs or lows shouldn't deter you from adding it to your portfolio... details how you can avoid letting your emotions cloud your investment judgment... and talks about how adopting this mindset can help you secure massive gains... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Master Series] Editor's note: Don't fool yourself into avoiding profits... Time and time again, investors make the painful mistake of passing on a stock before watching it skyrocket to new highs. This often tempts investors to chalk it up as a missed opportunity and move onto the next potential investment. But according to Stansberry's Investment Advisory editor Whitney Tilson, giving up on a stock too soon can result in multibagger gains being left on the table... That's why Whitney believes it's crucial for investors to understand how to determine whether a stock still has room to run higher or is simply a "value trap." In today's Masters Series, adapted from the August 26, 2023 issue of the Empire Financial Daily e-letter from his former firm Empire Financial Research, Whitney explains why a stock hitting new highs or lows shouldn't deter you from adding it to your portfolio... details how you can avoid letting your emotions cloud your investment judgment... and talks about how adopting this mindset can help you secure massive gains... --------------------------------------------------------------- The Three Most Dangerous Words in Investing Aren't What You Expect By Whitney Tilson, editor, Stansberry's Investment Advisory The common cliché on Wall Street is that the four most dangerous words in investing are, "This time is different"... But I've found a three-word phrase that's uttered just as frequently... and is arguably even more dangerous: "I missed it." You've probably grumbled these words to yourself before, as you passed on a stock you were considering buying... and then watched as it marched to new high after new high. The critical lesson here is that just because a stock has run up a lot, that doesn't necessarily mean it's too late to buy. Today, I'll show you why this simple, three-word phrase can be so misleading... In my decades as a value investor, I've seen it time and time again. Value investors like me tend to look in the bargain bin for beaten-up stocks that are trading at 52-week (if not multiyear) lows. They get a sense of satisfaction from getting a better deal than the guy who bought it a month or a year ago. It's a great strategy if – and this is a big if – you can correctly identify companies whose fundamentals turn around. The key here is to avoid value traps: the companies that never turn around, and thus their businesses (and stocks) keep declining and declining... But what about stocks that never really fall out of favor such that they end up in the bargain bin? We value investors often miss them. Take Alphabet (GOOGL), for example... In August 2004, the company went public at a split-adjusted $2.51 per share. By October, the price had already more than doubled. A year after that, it had doubled again. And two years after that – in October 2007 – shares were trading at $18. Now, they're up to around $141. Sure, it would be great to have bought shares right at the initial public offering. You'd be sitting on gains of roughly 5,520% today. But even if you didn't buy on day one, you didn't miss it. Heck, if you had sucked your thumb for a year, watched the stock go up 300%, and bought shares in October 2005, you still could have doubled your money in only two years... If you made this mistake, well, join the crowd. I watched Alphabet's shares continue to go higher and higher. It would be one thing if I had done the work on it and concluded that it was outside my circle of competence (it wasn't) or was too expensive (it wasn't). But that wasn't the case. I simply didn't do the work. Why? It's not because I was lazy. Rather, every time I looked at the stock, it was usually trading at or near an all-time high, so I kept telling myself, "I missed it" and moved on. --------------------------------------------------------------- Recommended Links: ['This Is How I'd Invest $1 Million']( "This is how I'd invest $1 million right now," says legendary investor Whitney Tilson. He's posting a new portfolio of stock picks for 2024. He isn't buying the Magnificent Seven... or putting an equal amount of cash into each. Instead, he's using the Monte Carlo method to see which of 4,817 stocks could double your money. [Click here for the full details](. --------------------------------------------------------------- [Strange Money Secret Used by the Ultra-Wealthy]( If you have any money in a U.S. bank account, you need to see this today – [it could help shield your savings through the turbulence ahead](. --------------------------------------------------------------- If I had just bought what I knew was a great business at any of those points, I'd be sitting on a multibagger today... Let me give you another example. My friend Chris Stavrou, who ran a small hedge fund called Stavrou Partners for decades, bought shares of Warren Buffett's Berkshire Hathaway (BRK-A) back when he was a stockbroker in the 1970s. Chris started buying it for his clients around $400 a share, even after it had risen more than 2,000% over the previous decade because he didn't fall into the "I missed it" trap. A decade later, he opened up his own hedge fund. By then, Berkshire was trading at an all-time high of $1,800 per share. So did he say to himself, "Wow, this stock has moved up a lot – I think I'll wait for a pullback" or "Drat, I missed it"? No. He saw that it was a great company run by a brilliant investor and the stock was still attractive at $1,800. So he bought it for his nascent fund... Today, BRK-A shares are each valued at well over $500,000! So learn this lesson well: Whether a stock is trading at a 10-year low or a 10-year high tells you absolutely nothing about whether it's cheap or expensive. Though I sold it much too soon, I was smart enough to buy Apple (AAPL) when it traded for a split-adjusted $0.35 per share back in October 2000... In the years that followed, Apple rolled out the iPod music player, iPhone smartphone, iPad tablet, Apple Watch smart device, AirPods headphones, and more. It's no wonder Apple has been one of the best-performing stocks of all time. It was a rare chance to buy a world-class stock before it rose nearly 47,000%... enough to turn every $2,000 stake into almost $1 million. Some stocks trading at multiyear lows are horrible value traps that are headed to zero. And some stocks trading at multiyear highs are going to be spectacular winners going forward. The lesson here is, don't fall into the "I missed it" trap... Ignore where the stock price has been, do the work, and make a rational decision based on your assessment of where the stock is likely to go in the future. Best regards, Whitney Tilson --------------------------------------------------------------- Editor's note: This simple strategy isn't the only method Whitney recommends for securing long-term gains. He recently stepped forward to join in revealing a powerful new way to help you identify which stocks could double your money... This information is normally only accessible to multimillionaire hedge-fund founders, but Whitney just opened the doors for everyone to learn this unique strategy with a recent online presentation. [Get the full details here](... You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or e-mail info@stansberryresearch.com. Please note: The law prohibits us from giving personalized financial advice. © 2024 Stansberry Research. All rights reserved. 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