Great episode of The Canadian Investor. Title mentions Canadian housing and tech (specifically SaaS), the latter is why I’m sharing. Braden talks about the dramatic multiple compression of some of these barely profitable, or not yet profitable, software as a service companies. I’m sure people hit the jackpot occasionally, but there’s a reason I don’t reach for stratospheric valuations. It’s usually indicative of a bubblish environment and with a little patience one can get into these great companies after the correction that inevitably comes.
I’ll let you listen to get the details, but they explain why some of us have never seen 60%-80% losses on a position and it’s not because I use stop loss orders, I’m not a trader. To be fair, I’ve only been in the game ~11 years, so it may happen someday, I’m not arrogant or foolish enough to believe it couldn’t happen. But I was taught that the best way to win in the stock market is to not lose (Buffet’s rule #1 and #2, his only rules). I believe this is some of the most under appreciated advice I see among many newer investors who start during a bull market and are confused when they get a reality check. Not gambling on hopes of future growth & faith in execution protects the investor from getting their head busted.
In the meantime, I’m excited to be able to start legitimately looking into some of the companies now that they’ve fallen back to earth.
Growth should always come at a reasonable price, as long as you’re investing and not speculating, and not lying to yourself about which of the two you’re doing.