[Wednesday This or That] Chase the Winner or Buy the Dip?
One of the biggest debates in investing is whether to chase a winner, even when it already looks pricey, or buy a loser in the hope that the selloff has gone too far.
Even Warren Buffett’s style evolved over time. Early in his career, he was heavily influenced by Benjamin Graham’s “cigar-butt” approach — buying deeply discounted stocks and looking for one last puff of value.
Later, Buffett shifted toward buying great businesses at reasonable prices, rather than simply buying whatever looked cheapest.
So today’s question is: If you could only choose one, which would you pick — A or B?
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🅰️ Chase the Winner 📈The stock may look expensive, but strong companies can keep getting stronger.
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🅱️ Buy the Dip 📉The stock has already fallen hard, and the lower price could mean more upside if sentiment turns.
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I would rather pay a fair premium for a business whose earnings, cash flow and competitive position are still strengthening than buy a falling stock simply because it looks cheaper. Momentum backed by fundamentals can persist far longer than expected.
The key is distinguishing expensive from overvalued. For names like $NVDA, $GOOG or $META, I would watch earnings growth and forward guidance rather than the share price alone. A 30x multiple with rapidly rising earnings can ultimately be cheaper than a 15x stock with deteriorating fundamentals.
Buying the dip works when the market has overreacted. But a falling price by itself is not a thesis. Sometimes the dip keeps dipping because the business outlook has genuinely changed.
So A for me, but only when the fundamentals are chasing the price higher too.
I’d choose A, but with one important condition: I’m not chasing price, I’m chasing quality.
A stock hitting new highs isn’t automatically expensive if its earnings, cash flow and competitive advantages are still growing. Buffett himself eventually moved away from simply buying “cheap” businesses, arguing that time is the friend of a wonderful business and the enemy of a mediocre one.
Buying the dip can work, but a falling price is not a thesis. Sometimes the stock is down because the business is genuinely deteriorating.
For me, the better question isn’t “Has it fallen?” or “Has it risen?” It’s: Will this business be worth significantly more five or ten years from now?
If the answer is yes, I’d rather pay a fair price for a great business than a bargain price for a weak one.
@TigerEvents [龇牙]