Investor Quote of the Week

Quote Meaning

The stock market transfers wealth from the impatient to the patient.

What David Tepper refers to is the ability for investors to wait for a good opportunity before diving headfirst.

In the stock market, inaction can actually be beneficial and lead to handsome rewards.

Even Warren Buffett has said that he has made most of his wealth by basically sitting in his chair and doing “nothing.”

In simpler terms:

1. Wait for the Right Moment: For those who wait, good things come. When investing, it's often better to sit tight and wait for the right opportunity rather than jump at every little change in the market.

2. Don't React Too Quickly: Sometimes, the smartest move is to do nothing. It's tough because you might feel like you should be doing something, but reacting too quickly can lead to mistakes.

3. Stay Disciplined: Stick to your plan. Even when it feels like you should be doing something, staying calm and following your strategy is often the best course.

The 2020 COVID crash is an excellent example of waiting. Many people panicked and sold their stocks at a loss.

However, those who waited and held onto their investments saw the market recover, even hitting new highs later.

Nugget of Wisdom

Stocks aren’t risky. Holding cash is.

Have you ever heard people say, “But stocks are super risky."

"I’d rather hold cash in the bank. It's safe.”

Unfortunately, these people are 100% wrong.

Individual stocks of poorly performing companies are definitely risky—that is a correct statement. Your investment can go to zero.

But stocks as a collective, if you’re investing in index funds only, are not risky if you hold them for 10–20 years.

The key here is holding for a very long time.

The longer the holding time, the less risky stock investing is.

Why?

Because you are beating inflation.

Cash in the bank is risky because inflation eats at it.

If you earn 1% interest on cash deposits per year and inflation is 3%, you lose 2% per year.

Multiply that by 20 years, you would lose 40% of your net worth.

Not smart, is it?

Stocks, especially in the US, outperform inflation by a large margin over 10–20 years because of the high-quality companies the country churns out year after year.

Good corporate governance and sound financial systems in the US make the stock market work extremely well compared to other countries, which is why indexes like the S&P 500 tend to beat inflation over a long time.

While this may not apply to other stock markets worldwide, the US excels in this area.

Mistakes to Avoid

Not buying when there’s blood on the street.

Be greedy when others are fearful.

Be fearful when others are greedy.

What people tend to not understand is that when stocks go down and markets tank, they become less risky.

By buying stocks now, you are actually increasing the likelihood that your investment will yield high rates of return.

Most of the time, novice investors who fall for the hype (e.g., COVID darlings like Zoom, Shopify, and Peloton) suffer severe burns in the process.

As an investor, it’s super important to buy when there is market weakness and sell when there is market strength.

After the "New Coke" fiasco in the late 1980s, Coca-Cola struggled with its brand image.

The company's stock was down, and many investors were wary.

However, Warren Buffett saw an opportunity.

Recognizing Coca-Cola's strong brand, global reach, and pricing power, Buffett began purchasing shares in 1988.

He invested about $1 billion, acquiring around 6.2% of the company.

Buffett believed in Coca-Cola's long-term potential.

His investment philosophy focused on buying excellent companies at a fair price and holding them for the long term.

Over the years, Coca-Cola's stock rebounded, and Buffett's investment grew substantially, yielding significant returns through both capital appreciation and dividends.

This investment became one of Buffett's most successful, illustrating the power of patience, value investing, and focusing on a company's fundamentals.

Stock of the Week

Zoetis Inc (Ticker: ZTS)

Company Description

Zoetis, Inc. engages in the discovery, development, manufacture, and commercialization of medicines, vaccines, diagnostic products and services, biodevices, genetic tests, and precision animal health technology. The firm operates through the United States and International geographical segments. The company was founded in 1952 and is headquartered in Parsippany, NJ.

Profitability Metrics

5-year average EBIT margin: 36%

5-year average net-income margin: 26%

5-year average return on equity: 52%

Growth Metrics

Revenue growth 5-year average (year-on-year): 8%

EBIT growth 5-year average (year-on-year): 11%

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