Investor Quote of the Week

Quote Meaning

Investing requires a lot of patience. You actually do more with less.

Investing involves a strategy of delayed gratification. Being able to sit through the noise, TV programs of talking heads, analyst opinions, etc.

By waiting and keeping your mind occupied with other things, you’ll be a much better investor.

Nugget of Wisdom

Invest when there’s blood on the street.

When stock prices are at an all-time high, it is best to be cautious.

These are actually times of "high risk" as investors pile into stocks, pushing valuations higher.

The risk and reward in general for buying stocks that keep going up tend to be a lot less compared to buying when stocks have been pushed down through aggressive sell-offs and market panic.

For instance, this was the price of Apple stock in 2019.

In 2019, Apple's stock price declined by 40% due to the general S&P 500 index also declining.

A lot of market players sold off their shares in a panic.

This would’ve been the best time to buy Apple shares and average in over the weeks as the sell-off continued.

You tend to get much better risk/reward payoffs doing this and going against the general market, as long as your investment thesis is sound and still valid.

A few months later, Apple rallied 46% and then went on to reach further highs.

Mistakes to Avoid

Using too much leverage.

You will be wrong at times about certain stocks you invest in. That is a given.

If you are borrowing money from your broker and borrowing over 30–50% of your actual capital, that is a very risky strategy.

A "margin call" could occur, where your broker sells all your positions arbitrarily to shield themselves from your losses.

You could lose all of your equity investment capital.

For instance, if you bought Zoom stock (see below) at $450/share using excessive leverage from your broker, you would have lost money if you rode the price down all the way.

Your broker would have issued a margin call, resulting in the liquidation of all your positions.

Many investors have gone broke this way.

It’s recommended to not use leverage at all, or use 5–10% leverage maximum if you really have to.

Stock of the Week

Adobe Inc.

Company Description

Adobe, Inc. engages in the provision of digital marketing and media solutions. It operates through the following segments: Digital Media, Digital Experience, and Publishing and Advertising. The company was founded by Charles M. Geschke and John E. Warnock in December 1982 and is headquartered in San Jose, CA.

Profitability Metrics

5-year average EBIT margin: 33%

5-year average net-income margin: 30%

5-year average return on equity: 35%

Growth Metrics

Revenue growth 5-year average (year-on-year): 17%

EBIT growth 5-year average (year-on-year): 20%

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