To The Moon

WARNING... before reading this post please consume at least three ice creams. This post will cause brain freeze, so you need to prep your brain lol.

Today's post is not directly related to stocks to watch today, its about how to PICK stocks for the long term. And simply put, picking a stock is about valuation. What is it actually worth, today, tomorrow, a week from now, in a year, or maybe even 5 years from now.

In this article i will give you the emotional Investors guide to valuing a stock. And i guarantee you, it is not what you will expect. But if you look at the pictures below you can see the approaches i use actually work, over 1000% return, and i am at 100% of the most successful investors on tiger trade. Not trying to blow my own trumpet here, just showing you proof that what i do works most of the time.

And im not selling anything, i am sharing knowledge with my fellow tigers. Not you tube, just you guys and girls. I will get benefits though, hopefully, from comments you make on this post. And also more people as friends. So, let's Get into it...

HOW TO VALUE A STOCK 

So quite a few years ago i did a post graduate diploma in finance at a university here in New Zealand. Actually never finished it, one paper short. But im all over discounted cash flows, easy peasy. Thats how you value a stock right? 

Actually no its wrong. At the time i was studying finance i was still teaching at a different NZ university... my specialty is organizational behavior. The psychology of humans in organizations. Basically how we all think and react in group settings. So why are discounted cash flows nonsense? Well I could conclude the post now by just saying analysists use them, and they get it wrong most of the time. But I promised brain freeze, so lets go there.

Fact: math is certain, 1+1=2, always has, always will. But finance is uncertain, 1+1 doesn't equal 2. 1 is a dollar today, +1 is a dollar a year from now. With inflation at 4% say, it becomes +0.96. Add say your stock going up 9% and the +1 is now +1.05. Thats a year from now, easier to predict than what's going on five years from now. And i have only presented two variables here, there are many others. 

So what i am saying is the use of math in finance is trying to create a sense of certainty that doesn't exist. The sheep of Wall Street are easily convinced that a) they are better than most, because they can do a DCF. But B) they are idiots because their multiple assumptions projecting revenues and costs for up to ten years become garbage in and total rubbish out. 

Don't get me wrong, i still love a well conceived DCF, it looks great, but its nonsense. It does give a base though to consider where a company is going in the future. unfortunately like many tools, total tools use them wrong. So a dcf is no way to determine the value of a stock... so lets get emotional...

So back in um, it was 1998, i was doing my undergrad degree in business. First year i obviously studied economics and marketing. So I learned a bit... suppy and demand, identifying market needs etc. being the planner i have always been well... i was in the university hostel first year, second year you were not allowed back... hmm macro environment vibe here, stuff changing. So to set up a flat at 19yo i needed a double bed, $50 bucks in November when i went home for the holidays, but when i returned in February that same bed was $250, seriously! I could get a single bed for $25 bucks, but my motivation required a double bed.

long story short, by the end of 1999, i amassed over 50 double beds, that i sold for 5x two months later. This is how you value a company my tiger friends. Understand the macros going forward, understand the motivation of their customers, understand supply and demand. 

Ok an example, $Palantir Technologies Inc.(PLTR)$ insane PE, but that doesn't matter. They have a product that nobody else can supply. There customers motivation is bigger than a teenage boy, thats no longer restricted by his parents and wants a double bed so he can sow his wild oats... come on im sure you all recall that time, haha. Takes two to tango so also about the ladies too. 

I stock is worth what someone is willing to pay for it on a given day, at a given time. No amount of time spent on a spreadsheet will give you the answers to the stock's value. Instead focus on the future, focus on demand, need , scarcity. Past performance is not a guarantee of future performance, idiots repeat it constantly and yet then use past performance metrics to inform their DCF models. Luckily, im just a tiny voice of sanity, sheep will be sheep after all, but I believe with just shy of 1000 people here in tiger being my friends. Well its the start of something great

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