As 2023 is coming to an end and with the calmer Christmas holidays approaching, I thought it would be a good occasion to take a look back on the passing year. What topics did I write about, where did I nail it and where have I been completely wrong? Going deeply inside myself, what am I taking home?
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One the most heavily watched and discussed stocks last week was British American Tobacco after it released a trading update. While the headline read relatively okay-ish, on the following pages they admitted to take a hefty 25 bn. GBP impairment on their US operations with the next earnings. While many see this as a non-event due to not affecting cash flows, I’m looking at it differently. I rather feel confirmed with what I wrote earlier in the year about Altria.
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Tech stocks, “Big Tech” or the “Magnificent Seven” – the same the names get more stupid, the riskier investing in their stocks becomes. Many do not see it this way. For the bona fide investor these are core investments of their portfolios with great future potential. However, a critical look back at history tells us that the risk / reward ratio is not favorable. Size does not equal safety.
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No matter whether experienced or not, almost every investor is on the hunt for undervalued stocks to make money. What could be less welcome than a stock which has fallen in price and become cheaper? The problem is, “cheap” is not automatically “cheap”. In fact, buying cheap can become a costly mistake. I see a strict urgency to clean up with this dangerous myth that a stock only has to fall enough to become attractive.
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Likely, everyone will know a story that kicked a stock into hyposphere, only to fall into dust later. The respective companies either did not recover anymore or went entirely bust. They all share one commonality: a nice story that catches the interest of especially retail investors. But where there is excessive greed without the support of fundamentals, the fall from grace is just around the corner. Here’s an example that was set to disrupt an undisruptable industry: tobacco.
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There are many rules of thumb and well-intentioned advice for younger investors. One such “rule” says that it is better to buy stocks of older and proven companies. While I do not disagree with this on an isolated basis, I am missing the second part, namely that every business has a certain life expectancy. There comes inevitably a time for every company to either step into the background or to disappear altogether. History is full of examples.
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It was hard not to notice over the last few weeks alerts about Canon’s breakthrough announcement. The Japanese conglomerate has been working for a decade on a completely new technology compared to ASML’s EUV monopoly of how to produce small, state of the art semiconductors. Canon has an own approach that will soon enter the market. Could the stock of Canon be in the starting blocks for a new era?
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It is no secret that many retail investors tend to act on the stock market exactly contrary compared to what they do in everyday live. A special discount or promotion – let’s get it! When stocks fall – panic. When stocks or themes are en vogue, they jump in to not miss the (rolling) train – despite the next coming. Often, this behavior is explained by emotions of fear and greed. However, it goes further than that. There’s a component to it, I call “pseudo-logic”. Why you should be cautious with logic when investing is today’s topic.
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I am happy to present to you a new type of Weekly: My first interview. As a stock investor and blogger myself, I am also interested in what my colleagues are thinking, saying or writing about different topics regarding stock investments.
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In times of economic or political stress it is always good to have defensive, iconic consumer stocks in the portfolio – at least this “common wisdom” applied in the past. However, during the current market decline which in technical terms was not even a correction (the peak to trough drop was less than 10%), the overall sentiment already showed first signs of a panic. Not only that, the highly praised “defensive” stocks actually lost disproportionately. How come? And was it foreseeable?
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