The Question on Position Sizing/Diversification and… Lessons Learnt

I haven’t written a post for quite some time. I currently have a few topics in mind. Hopefully, I will have them written down in a short period of time.

As a starter, I would like to talk about diversification/position sizing, which is something I have been thinking heavily about. But first, let me explain why I came to contemplate this.

It has something to do with the investment record I have thus far compiled. And it can be described in one single word: abysmal. Yes, more than terrible, my record until now has been really abysmal.

I have really just meaningfully invested in three stocks since 5th September 2013, the day I bought my first stock. China Agrotech, Weight Watchers (WTW) and Town Sports International (CLUB). A lot more money (in relation to my net worth) was invested in the latter two. But all of them have given me more than 50% of losses. (>~70% for the later two) Realized loss for the first and unrealized for the latter two. Naturally, it bugs me and gets me into thinking what went wrong?! Self-afflicting and self-condemning aside, at least we ought to figure out what we can learn from our mistakes.

I made the first investment solely on my own. It was cheap. Maybe dirt cheap, since it was a net-net when I first found it. However, it turns out to be some sort of a fraud. The stock stopped trading after one of its creditors (I think it’s Standard Chartered) demanded they repay their loan. I summarised my lesson on a previous post. The focus here will thus be the latter two.

I invested in both WTW and CLUB alongside Geoff and Quan, both of them I consider my mentors. While WTW has awesome business economics and CLUB only has a so-so one, they were both cheap enough to get anyone’s attention when we bought into them. Yet, at the same time, they were both cheap for a reason. As weight-loss businesses, they were in constant need of replenishing their customer base. But they just haven’t been doing a good job at that. Some of that is due to new technology (like free apps and wearable technology attacting WTW’s basic business), and some of it comes from new exercise regimes (like studios taking customers away from CLUB’s traditional gyms) Worse still, they are also carrying meaningful amount of debt. So why did we still like them?

Basically, we believe they had certain moats around them that will make the challenges only temporary. We also believe both have the capacity to handle their debt obligation. The verdict for whether they can handle their debt is still out because they don’t have to repay or refinance their debt in a few years. But with both their revenue declining non-stop, we have been very wrong about their moat so far. And we may well be proved wrong about their capacity to handle their debt for the same ultimate reason.

The argument for WTW’s moat is simply that they are the most effective weight losing program out there. While free app is easy to get and use, they just aren’t as effective. People don’t stay with something they got for free easily long. And without sticking with the same program, there is no way you can lose meaningful weight with it. We have always envisioned it will take three or more years for things to get back to normal. Or in other words, for the fad in free apps to die down. But what about Apple Watch? With wearable technology maybe starting to get ingrained in people’s lives, wouldn’t there be more ways for such free apps to do its damage in the longer run? Or maybe as a gadget, it does help people lose weight easier, but can’t replace the psychological help found in a weight watchers program? I don’t know the answer to be honest. Geoff and Quan think the initial thesis is still pretty much intact. I personally ain’t as certain about it anymore.

CLUB, on the other hand, is all about economies of scale. They have the densest network of gyms in NYC. And it’s almost impossible to replicate it without throwing a lot of money into the sea. Even if studios really can gain traction in the longer term, we reckoned that they will certainly have enough time to convert their gyms into studios. Moreover, they were at the lower range in terms of leverage historically. But after more than 1.5 years, things just weren’t getting any better for either of them. We all agree CLUB is in the weaker position between the two. And that’s because in addition to its debt, it also has high operating leverage in operating leases. Now, that’s really a problem.

For WTW, it at least can adjust its marketing cost by its own will to gain more time for a turnaround. Maybe, in theory, CLUB can really gradually convert all their gyms into another format that fits what customers are looking for at the moment. But in reality, CLUB may already be bust before they can do anything close to that. Not only did we already lose money in CLUB, we also “lost money” in an opportunity cost fashion of missing the price uptick in LTM, another gym operator, due to the LBO of that company. CLUB, LTM and WTW are not the only stocks that Geoff and Quan (and later, we) looked into. If you take a look at the market price changes of everything that was looked at, you would certainly point out how silly it was for us to have actually invested in these two. (Quan has talked about the experience so far in this post, http://gannonandhoangoninvesting.com/blog/2015/4/23/stock-picks-review-and-lessons-learned. You can see how the other stocks performed there) This begs the question for us. Should we have been more diversified?

All the three of us were pretty concentrated with our investments. I just agreed with them that going for a more concentrated portfolio is the way to a better than decent investment record. If you pile up a list of investors that have a long term track record of compounding money in the 20s percent per year for over a decade, you will mostly come up with a list of investors that favor concentration. For instance, Joel Greenblatt, Eddie Lampert, Bill Ackman, Glenn Greenberg, Ted Weschler, Allan Mecham, and so on… They all basically had a pretty concentrated portfolio of having most of their capital in below 10 stocks.

I also came to think about diversification because of my current new job, where I am being fed a lot more attractive opportunities than ever before. When you are given 10+ names a time, you would naturally think whether it’s actually better just buy all of them instead of trying to make a judgement on which one to pick. Then, there is the fact that Buffett once held 40 stocks at a time during his partnership days.

That was the question I asked myself. Was it wrong to be so concentrated?

And here’s how I came to my own conclusion on the subject. I don’t think the degree of concentration was wrong. A more diversified portfolio of owning everything we looked into would have yielded much better results that what I have gotten so far for sure. But that’s missing the point. That’s not the real lessons that is being offered here. Now, to the real lessons from my investing failure. Really, instead of not diversifying, we simply made the most sinful mistake in investing. Selection mistake. One that is due from greed.

A declining business is usually not a good investment proposition. It’s only “usually” because in cases where you can control the pace of decline of the business or there are some structural characteristics ensuring a gradual decline and easily adjustable cost base, then you can probably exit the business in a profitable way. But in cases where there is essentially a “customer problem”? Then sorry. At best it would be a terrible experience before you break even at the end; and at worst, permanent loss of money. Adding leverage to it makes things maybe ten times worse and much more skewed to the worst scenario. Well, if you add in more than one layers of debt? You are primed for a disaster.

By customer problem, I meant a fickle customer base where they don’t naturally like your product/services or are susceptible to fads and trends. Geoff and Quan did mention they have to replace 1/3 of their customer base every year. This challenge never really caught my attention until now. If CLUB instead is a company that sells cigarettes, soda, chocolate, system software and so on, it would be a totally different story now… That’s lesson number 1 for me.

The second one is more general. As I pointed out, CLUB has been primed for disaster all along. And the major reason why it’s in a worse situation than WTW is it has both debt and operating lease. So what if CLUB owns all the places that hold its gyms?! Ah… maybe then they can deal with the turnaround with much greater ease. That sounds obvious to us now. How I wish I was this wise before. Essentially, we did study a gym operator without debt. And that is Life Time Fitness (LTM). Unlikes CLUB, it operates huge facilities that pretty much act like a country club to its members. They own most of their facilities, with many already mortgage-free. And yes, we believed it’s a better buy-and-hold candidate from the start. Yet, we still went for CLUB in lieu of LTM. WHY? Well, the answer is simple. We were greedy. That’s it. Instead of choosing something that is much safer, we opted for the one that provides the higher leveraged yield. And I, specifically, was lusting for the potential 3 bagger built into the stock of CLUB.

I thought I read enough about “focusing on the downside and the upside will take care of itself”. Turns out I was as clueless as ever. Maybe there really are things you cannot learn from books, but only from pain. Don’t be greedy is the lesson number 2 for me.

Diversifying is only a way of hiding from the real mistake of making a wrong selection here. While the above points out my own personal experience isn’t a logical argument for diversification. It doesn’t mean I have successfully argue against diversification. In fact, I don’t think I will ever be able to do so. But I did finally come up with my own personal view on the subject.

My own answer for that comes from my new working experience in a hedge fund and an excellent answer I got from Geoff. (Which you can read from here: http://gannonandhoangoninvesting.com/blog/2015/5/19/when-should-you-diversify) I think most importantly, the level of correct diversification, for me personally, is pretty much limited by my own time and ability to absorb information needed to support that level of diversification.

From a risk management perspective, the biggest advantage of diversifying more is reducing the impact of a blow from any single investment. However, to successfully implement a more diversified portfolio, I think you have to first pass the hurdle of getting enough time to understand all that are in your portfolio. The problem I am starting to experience is I simply don’t know enough about a few of the investments currently in the portfolio of the hedge fund I am working in now. When a piece of negative news crops up about any one of them, I simply have to do a lot of work before I can add valuable comments to the team. (Trust me, when you are managing other people’s money, even if it’s only a 5% position, you want to know everything and make the right decision of either selling or averaging down) Having too many stocks in your portfolio simply dilutes the effort you put into each stock.

Or so I thought. But Geoff reminded me this isn’t necessarily the case. In fact, what is the most brilliant part of his response as mentioned above is that you can hold 10 or 30 stocks and still be putting up the same effort before you buy each stock. The only difference is you will have to hold, on average, each stock much longer if you were to hold 30 of them instead of 10. The key is not to dilute your effort you put into each stock.

The second important factor is of course the amount of bargains being offered by Mr. Market. It makes natural sense to buy more in times like 2009 when many obviously high quality businesses are selling on the cheap, or when you can find stocks that have a long history of profitability selling below net cash. Being stubborn and study every one of them to unnecessary levels of depth will be a costly mistake for sure. But barring such obvious cases or unusual times, real bargains should be scarce.

Combining the above two points, it just seems better to concentrate a bit more to me.

Warren Buffett and “Rule #1: Don’t Lose Money”

I have a setting on my Google account that helps me track all news on Warren Buffett. (I also follow, who else?, Bill Ackman and Sardar Biglari)

And there was this very interesting title that appears on my email yesterday. “1 Piece of Advice From Warren Buffett That You Can Ignore” (Read more: http://www.fool.com/how-to-invest/personal-finance/2014/12/13/1-piece-of-advice-from-warren-buffett-that-you-can.aspx#ixzz3M1ltzJPC)

Now Warren Buffett is my greatest hero. But I do not exactly treat him like a God. And whenever there is an opportunity to learn about investing, I usually pound at it. I was actually excited to see there might be some interesting angles into what we should NOT learn from the greatest.

Unfortunately, I was disappointed.

In the article, the author points to the famous “Rule #1: Never lose money” as the thing he would advise us not to follow. To defend his proposition, he is basically telling us that it’s okay to be wrong, and the Utopian strategy of never losing money will not work and perhaps entails you to put your whole portfolio into US treasuries.

Now, this is interesting. I basically agree with his points. It’s just that his misunderstanding of Buffett’s quote makes me feel compelled to write this post.

First of all, I actually never recall the actual quote being “Never lose money”. Instead, I always think it is “Rule #1: Don’t lose money” And there is a huge difference between the two. When Buffett espouses his investment philosophy, he always tells us that even though he aims at crossing the one foot bar, he will keep making mistakes. It was never a shame thing for him to admit his own mistakes, as you can read from his shareholder letters. For a man so willing to admit his own mistakes, it sounds strange for him to ask people to never lose money. In other words, it’s simply wrong to imply from this perhaps erroneous quote that Buffett believes losing money is unacceptable.

So what is Buffett really saying?

He is talking about “Don’t lose money”. And that is a totally different idea. This is actually a really really important idea from Buffett. So it is better we do not misunderstand him. The notion behind this famous saying is not to ask people to never lose any money, but to remind people what to really focus on. And that’s to frame your mind into thinking about the downside, instead purely of the upside.

(A little sidetrack here: Even though Buffett is the most followed investor of all time, he is actually not that well understood. There are a lot of superficial “explanation” of Buffett on the Internet. To really learn from him it’s important to know what to absorb and equally important, what not to. Two great sources that come to my mind immediately are Alice Schroeder and Geoff Gannon.)

If you go to YouTube and search for Alice Schroeder, you will find a value investing congress video featuring Alice. That is one of the most important videos on investing you will find on YouTube. One point for you to really digest is what Alice points out as one of a few unique things about Buffett’s investment process: (not quoting from the video at all) Now Buffett is different. Unlike almost everyone else, instead of looking at the upside, Buffett immediately skips looking at a lot of investments because of the potential cat risk involved. He does so by asking one simple question before doing any work on a prospective investment. The question is basically: What are the odds that this investment could fail because of catastrophe risk? In other words, what are the major things that could go wrong? And if he feels like that he can’t size that risk up, he will not consider investing at all, no matter the upside.

Going back to the Motley Fool article, the author obviously lost money with his early investments because he didn’t spend much time thinking about the downside. He thought he would never lose money, in lieu of trying to not lose money by focusing on the downside.  

Now, that is not a good example to follow. The author’s last advice, “…never losing money is a Buffetism that I believe can be easily ignored”, is another one to not follow.

Bill Ackman and Activist Investing

I didn’t intend to write about Bill Ackman again so soon. But that was until I read another article mentioning Mr. Ackman.

“How activist hedge funds ‘on steroids’ have become a boardroom enemy” – That’s the title of the article from Financial Post. (http://business.financialpost.com/2014/11/15/how-activist-hedge-funds-on-steroids-have-become-a-boardroom-enemy/)

The gist of the article is briefly this: With the current, renewed hot trend of activist investing, many “experts” believe the majority of corporates are under danger of assault. Activists, due to their mandate of only serving themselves, in the quest for their own profits, usually put shareholders’ interests behind their own. As such, they tend to seek short term performance rather than long term ones. The article also mentioned a study done by a professor from Columbia showing activists do not help generate long term outperformance to their targets.

Without reading the actual study, as well as given what we know about human nature, I am not here to contend that activist investing is doubtless an act of virtue. I think it depends. Yet, I believe it would definitely be wrong to suggest activist investing, per se, is detrimental.

How can it be? Really?

As mentioned, the biggest accusation against activist investing is that they tend to flip their investments. They pressure the board to pay out cash, buyback stocks, cut cost and so on, then cash in the resulting gain and leave the company behind in a weaker form. Because of their presence, management cannot focus on implementing the correct long term strategies. What all this means is that activists are inclined to attend to their own self interest while hurting that of the majority shareholders. Right. But are activist the only portions of the whole human race that exhibit such self serving biases?? Are you telling me management teams are all public servants to shareholders, carefully attending to shareholders’ needs without an iota of exploitation??? Oh, where has that famous agency problem gone????

People, when condemning activist investors, love to mention the book “Barbarians at the Gate”, which documents brilliantly the saga of the LBO of RJR. (Disclaimer: I love the book) They find it the perfect illustration of what private investors can do to destroy values with the aid of billions in capital the lack of mandate to protect shareholder interests. Indeed, that drama showcased the greed from people in KKR and other players involved. What is interesting is how often people forget the management team of RJR back was among the players involved in the deal. The excesses of the management doesn’t look like a lesson on how to treat shareholders’ assets to me. While there are laws protecting shareholders’ interests in the USA, the fact is simply that laws are not always effective. I don’t believe this is a point that I need to elaborate on.

Moreover, as Ackman himself has repeated many times during different interviews, the modern day activist investing playbook requires the support of other shareholders in a company. It’s no longer the era when a corporate raider can simply takeover a company secretly and tear it apart. In order for an activist to be successful, it usually requires a vote of support from other passive shareholders. And how can this be a bad thing? Are you suggesting the other shareholders are not sophisticated enough to make the right call here? If so, then why should you believe they are sophisticated enough to choose the right CEO at the first place or wise enough to assess the management team on a ongoing basis? 

Certainly, the article’s use of Ackman as the main “antagonist” gave me the biggest reason to write this post. Using Ackman is simply wrong or maybe even deceptive. Again, people love to show one aspect while hiding the other. Knowingly, Ackman made a mistake in JC Penny (but it wasn’t only his mistake. Watch his interview with Charlie Rose last year for this). However, Ackman made billions in Canadian Pacific, GGP and most recently Allergan. The two former cases are perfect examples of an activist bringing long term value into the deal. And no, Ackman aims to hold his core investments for four to six years. When you point out that the average holding period for an activist is 9 months, please use an investor who usually holds an investment that long as your main example.

Another point I want to point out concerns the quote from Claude Lamoureux, former CEO of the Ontario Teachers Pension Plan and co-founder of the Canadian Coalition for Good Governance. He said he prefers the long term strategy of Warren Buffett to that of Ackman’s. Both are my heroes. And while their strategies do usually differ, that doesn’t mean Warren must disagree with what someone like Ackman or even Icahn wants companies to do. The best proof is Apple. Warren mentioned on CNBC once that Steve Jobs consulted him what to do with all the billions in cash Apple has. After some Socratic style of questions, Warren obviously hinted that buying back Apple shares would be an intelligent thing to do if Jobs believed his company’s shares were massively undervalued. Oh! Doesn’t that sound familiar? The only difference is Carl Icahn and David Einhorn did actually voice out their opinion publicly. One might even argue that, in this case, Warren hasn’t been doing enough to create shareholder value!

I believe it’s futile to discuss whether activist investing in general is good or bad. I find it a necessary thing to help balance the advantages management teams having no skin in the game usually have over shareholders who do. But of course, their growing power can also be misused. The only scenario in which I believe a valid debate is warranted is when we are discussing a specific case of activist investing. Only with the specifications of a specific case, can we really judge whether the activist is creating real value or not.

In a word, I believe activist investing is just like a knife. People can use it for surgery, eating, surviving and so on. And people can also use it for torturing, stealing or even murdering. Is knife a necessary tool to us? Yes. But is it good or bad? It depends.

Bill Ackman and Investment Risks

Bill Ackman of Pershing Square Capital Management is my favourite hedge fund manager among currently active hedge fund managers.

To be honest, I completely idolize him. The biggest attraction to me is the way he invests. He takes a concentrated, value approach. He doesn’t pay much attention to the macro environment. And he only looks for good companies, those that are cash-flow generative, dominant, not levered, resilient throughout economic cycles. Basically, he invests the way our biggest hero, Warren Buffett, would. (Except Ackman likes to effect changes) And that absolutely absorbs me.
Ackman is more than 30 years younger than Buffett. But he keeps things simple the way Buffett does and then goes on to create so much value. I can almost imagine him in college thinking to himself: I am going to do what Buffett has done. Basically I am saying he has done the thing I really want to do myself. And his successful example simple rings such a big bell in me, always giving me a huge sense of motivation to work hard. (Of course, I am sure Ackman is a much more competent guy than I am)

I simply believe any moves he makes is of immense learning value to us value investors. Obviously, given his high profile, most of his investments are already well discussed in the media. So I do not plan to get into that now. But there is one thing I would like to discuss in this post.

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That is: Portfolio construction or the degree of portfolio concentration.

I have read a number of articles proclaiming how risky Ackman’s investing style is. One article cited one investment professional saying Ackman’s close-to-40% allocation in Allergan is a prime example of reckless risk management. Other examples include how Ackman lost $500+million in JC Penney and once more than 90% in the Target investment. Clearly, they are equating a concentrated portfolio as risky investing. And pointed out two examples as proof of this claim.

But is this correct? I doubt so.

One way of rebutting their claim is to think about how Ackman performed during the financial crisis. If you think someone is running a very risky portfolio, wouldn’t it show during one of the worst market condition ever happened? The fact is Ackman outperformed the market during that period of time. He was down in 2008, but less so than the market. And his hedge fund certainly didn’t blow up. I am quite sure most people who owned a more diversified portfolio performed worse than Ackman did during those dark days.

The key is what you own, instead of how many you own.

Indeed, I am not specifically saying a concentrated portfolio is the only way to go. (Even though I do personally prefer so) But what I am trying to say is it’s totally unintelligent to discuss how risky one’s portfolio is without talking about the quality of the investments that person owns. Certainly, you should also think about whether he/she is employing excessive leverage or not. (In the case of Ackman, he rarely uses any)

The only thing we can derive from the number of investments one has in his/her portfolio is the fluctuation of that portfolio will generally be bigger than a more diversified one. (i.e. higher volatility) However, it’s important not to confuse volatility with risk. Risk, as both Buffett and Ackman contend, is the probability of facing a permanent loss. Whether the price of the asset goes up or down widely between the time of your purchase and the time of your sale should be irrelevant, as long as you are not bound to act stupidly during that period, either due to leverage or some other reasons.

Since Ackman specifically looks for quality businesses with some fixable problems, alongside his willingness to do things actively, including effecting changes in top management and changing capital allocation strategies, both of which actually act as a safety net to one’s investment, is Ackman really running excess risk?

Antifragility and Value Investing

I am reading the book, Antifragile by Nassim Taleb recently. I love his writing style and all of you know about the Black Swan. This book however, should be even more important.

While I was reading The Black Swan, Taleb’s messages of our inability to predict the future, as well as luck playing a huge role in our lives gave me some shivering senses. I don’t like the idea of not being able to control my own life. Neither do I like the idea that Buffett has only been lucky in his life. While Taleb’s messages make perfect sense, I thought in order to retain my love of investing, I might need to dishonestly forget about his books (including his first book Fooled by Randomness). If there is always the possibility of a black swan coming, how can we be sure of any investments? If there is always a blind spot for us, how can we run a concentrated portfolio anymore? I was confused and felt perhaps a bit desperate. (I have long hoped my future will rest upon value investing)

Luckily, it turns out I was simply dumb. If you go on to read the book that completes the messages from The Black Swan, you will how antifragility has all do with value investing. I just didn’t get the real message at the first place.

According to Taleb, “robust” is not the opposite of “fragile” as many would have suggested. Fragile is a state where your potential loss will be larger than potential gain under the uncertain future ahead. Imagine you are mailing your oversea cousins a set of expensive silverware through air. You would try to package the set the best way you can, sticking all those “Fragile, please handle with care” labels on the box. Simply put, you would be pretty worried about any serious turbulence during the flight that could cause damage to your silverware. That, is what we call a state of fragility. Robust, instead is one that fears no harm. Perhaps you are trying to send some sponge to your cousins overseas. (Even though it’s highly unlikely to worth the air fee….) No matter how much the flight is going to be affected by possible turbulence, your sponge should stay intact. However, the real opposite is not to be unaffected by unpredictable and detrimental effect. To really become the opposite of being fragile, you need to be able to benefit from such possible effects. Or more accurately, your potential gain needs to be more than your potential loss.

And with that, you should how Buffett has been practicing the notion of antifragility almost all his life. The real idea behind buying a dollar bill for 50 cents is really antifragility. With a silly and cheap price, the unpredictable future events will be more beneficial to the value investor than not. If you buy a company below its net current asset value, it’s usually one that has not been doing that well lately. Any change or any reversion to the mean will push toward a better state of business and make it more valuable. Staving away from leverage will make u less vulnerable to sudden changes in the business environment.

In face of our inability to know the future and having only incomplete information, buying value stocks is the way to invest.

What is investing? (Part 1)

Today, I want to talk about investing in the most general sense.

What is investing? And perhaps more importantly, what is not investing?

According to Mr. Warren Buffett (my top hero), investing is laying money out now and receiving more in the future. To be exact, it is the purchasing power that matters. This, in a nutshell, is the most fundamental idea of investing. To get more purchasing power in the future by forgoing what you can afford now.

A few keys to remember.

First, investing is always future oriented. You want to get more in the future.
Second, investing is about getting more in the future.

Okay, you could very well protest those points are self-evident. Why do I have to highlight them?
Let’s see why.

A lot of folks I talk to about investing are deeply corrupted by things that reflect more of the past than they do about the future. They could be using technical analysis, trying to gauge the direction of the stock price through analyzing historical trends. Or they would simply look at where the stock price has been doing before, and if it is above the current stock price, they would feel the investment is “safer” than it otherwise will be. And you can’t get any further away from being future-oriented than that. To invest, it requires looking into the future. Your analysis should always begin with the historical data. But that’s only a starting point. You need to think about the future before you can make an investment.

Second, getting more. Here I am talking about how confident you are that you will get more. When people look at stocks as a ticker, moving up or down, they are not thinking about anything concrete. Stock investing is like a number game to them. Okay, I am buying 100 shares of Tesla, because it is hot! But is this person really aiming at getting more in the future? Or perhaps money isn’t that important to such people. However, if that $23,100 is all the money you got (at the time of this writing, a single share of Tesla is at around $231), would you purchase the 100 shares because you think it’s a hot stock and will go up simply because it will stay hot?

Let’s use a house purchase as an example. If you are a newly wed, with a baby coming, and looking to purchase a house, what would you do? Do you pay for an apartment because people tell you it’s a nice place and convenient and base your decisions only on those information? Instead, I could safely bet that you probably would go to visit the apartment, compare it with several others, talk to people who live there to see whether it is really that good a place to live and etc, before you even consider writing that big cheque. In a word, you would try to understand if what you are paying is really worth it. And if there are better alternatives.

Stock investment is basically the same thing. You ought to do your homework and understand if the company is really worth what you are paying before you can purchase it.

What does this have to do with my second key point? The key is, only after you know what the stock should be worth could you really be confident enough that you could probably get more in the future.

A little summary.
1. Be future oriented. Know when you are thinking about the future, and when you are only blindly looking at the past.
2. Know the company you are investing in. At least know what it should be worth within a range. Don’t just buy stocks because it’s hot, or others are urging you before knowing what that company really is about. Buy stocks the way you would buy your first house.