I love this scene from Succession1:
I’m at the bull market point where success no longer interests me. I’m tired of hearing about the money people make from tech names.
Bull market failure is much more interesting to me.
The US stock market is doing well right now. It’s up almost 10% on the year and nearly 20% on the previous year, and is very close to all-time highs.
However, underneath the surface, there are a lot of stocks that are experiencing major declines.
There are a number of large market cap and branded tech stocks that are getting killed right now:
Fashion comes and goes. The same goes for clothing brands:
As someone who grew up in an environment where Nike was one of the most dominant brands on the planet, it’s hard to grasp the fact that the stock market has left this company for dead.
But I understood.
Tastes change. Mistakes were made. The market continues on its way.
Speaking of mistakes…
There are plenty of pandemic darlings on offer as investors try to understand how the world is changing in real time.
Here’s the other side of it:
Absolute wreck.
I could keep naming names. Quantum computing and software stocks come to mind.
This is an interesting environment if you are a bottom fisherman. Maybe you, like everyone else, are overexposed to AI trading. Maybe you want to diversify. Or maybe you enjoy diving into dumpsters and making purchases when the streets are filled with blood.
Let’s take Netflix as an example. Stocks offered investors extraordinary returns over the long term — 30% annual It has been a publicly traded company for approximately 25 years.
What a run.
But there were also some bone-shattering setbacks that caused worldwide suffering:
There were declines of 63%, 76%, 44%, 56%, 82%, 76% and now it is around 50%.
There are currently two ways to look at a company like Netflix:
1. This is a great buying opportunity. Every time the stock crashed in the past, it came back roaring with a vengeance.
Every crash was a gift to investors who could hold their noses and wait.
Maybe this is one of those wonderful opportunities.
2. This time is different. Netflix appears to be transitioning from a growth play to a more mature company. The best days for the company may be behind us.
This is what makes stock picking so difficult.
I don’t know! Both situations are very interesting depending on how you feel about the company.
Netflix has won the streaming wars. But it’s also possible that he’s like Russell Crowe at the end of Gladiator. He won, but at what cost?
This is the agony and exhilaration of stock picking.
Sometimes buying crashing stocks can lead to huge gains.
Other times, stocks may never come back from the dead and reach their previous highs.
Pick your poison.
Michael and I talk Netflix, bottom fishing, and more in this week’s Animal Spirits video:
Subscribe Compound so you won’t miss any episode.
Further Reading:
It’s Easier to Pick Losers Than Winners in the Stock Market
Now here’s what I’ve been reading lately:
Books:
Podcast book tour:
1There are a lot of people in the tech world who became incredibly rich at a young age and which this character is based on.
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