I'd like you to read carefully to the end.
Two things:
(1) I am never offended by someone disagreeing with my opinion. I welcome hearing contrary positions. But you need to be specific in your criticism. I searched and I did not find any time that I recommended emerging markets here. I do recall saying on the Art of Investing thread that the next up wave could be the emerging markets. But that was a prediction for the next bull market and not a call to buy them there and then. Even so, EM has outperformed the median stock over the past year.
(2) You refuse to understand the difference between trading and investing and the impact of timeframe. More importantly you are refusing to appreciate what is priced in and how/why that matters. Small cap stocks are always risky. They have been underperforming big caps forever. And presently many of them are priced for bankruptcy. It is to be expected for them to be in a downtrend. And it is likely for many of them to go bankrupt over the next year or so.
Within this bigger context, there are two opportunities: (A) if you are agile, you can catch very sharp violent up moves. E.g: Yes, BFLY has been in a downtrend. But within that downtrend, it has frequently had 50% moves that were tradeable, the latest was just a week ago. Look at the chart below and put the moves withing the red/green lines and the indicators below.
It is a trade, not an "investment". If you stop being so selective about what you want to hear and remember, you see that I am never married to a position and when it comes to investing (vs trading) I am clear about the risks and fairly conservative. Just a couple of days ago I said that ME is running out of runway and may not survive. This is so even though I had taken a position in it and see potential in them.
(B) If you are patient *and* you are good at identifying value *and* you diversify well, you can find great longer term investments. As an investment: Small caps in general, and biotechs in particular, are *very* risky. You have to diversify *a lot*. I've had this discussion with you about biotechs before. You have to cast a wide net and then cut losers and allocate to the winners. And I told you at the time to expect something like 80% losers. So you are being disingenuous complaining about why risky stocks are falling in a bear market.
There are ways of stacking the odds for yourself. Cash position is key. So is the company credentials and experience. EDIT, NTLA, CRSP are at the forefront of genetic research and headed by world renowned scientists (two of them are Nobel Prize winners). Importantly, they have enough cash to ride out the near term storm.
CGEN is another one. The chart looks like crap. But the company has survived for 30 years going up and down. They are trading near cash value and have a few promising pokers in the fire. Their cash will carry them through for more than a year. After that, one of 3 things will happen: (1) A new bull market begins and they will rise high on the back of having been priced for bankruptcy but now having access to free money. (2) The economy is in shambles and they will go even lower or bankrupt. (3) One of their products gets approved and the stock will go sky high. How high? Just last year, BMY (GSK?) invested in them for $8 per share to have some access to their product. If they just go back to that over the next 3 - 5 years, you have a 15x bagger. The stock has a history of moving 8x from its lows.
For this level of reward, you should expect to lose all your money if you buy and hold them. In fact losing 80% of your investment is the most likely outcome for holding *any* high growth stock. What you see in the market are the survivors not the average investment. You don't believe me? How strong and favored was Sun Microsystem? Where is SUNW now? What about YHOO? Even APPL and AMZN flirted with bankruptcy in their history.
Still not convinced? There were nearly 8,000 publicly traded companies in 1998. Fast forward 25 years later and you have only 3,000. More than half of these 3000 companies went public after 2010. So you had a 80% death rate. And of the current crop, at least 500 (1000?) won't make it through next recession.
The difference between us is that I expect this. I expect that most companies will go to zero. When I pick something, the very first thing I look at is how long they could survive. But you think that somehow you can tell who is going to survive and who will die. There are no "investments" of the type you think. The only viable alternative for most people is SPY and QQQ because the managers are adepts at using momentum and survivor bias to continuously seed their fund and trim out the losers.
Do you get what I am telling you? If not, reread it. A trade is not an investment. And investment has to be diversified to the tune of hundreds of cross assets and sectors because the expected return for companies is zero. Having the illusion that somehow you can pick a few winners is detrimental to your finances.
I expected that my readers to know all this because nobody here is a kid and most people have been investing and trading for decades. But apparently I was mistaken.
PS Here's the charts of BFLY and the long term chart of CGEN. How many 50% run up opportunities do you see in BFLY? How many multi-baggers do you see in CGEN?
BFLY
CGEN - very long term chart
 |
