August '24 Stock Pick

Repeat after me, the economics of a business matter more than the short term blunders.

Let me be the first to say, I have a problem when it comes to stocks.

For the common investor, the most exciting portion of the journey occurs when they see their positions starting to run to the upside. They spent hours pouring over annual reports, digging into the proxies, and talking about the company with their buddies. It is a ton of work, and when you are “right” it’s an amazing feeling.

This is a feeling I love too, but there is something I love more. The smell of blood.

The rush for me comes when a company that I have told myself, “I would love to own one day” gets something wrong and their share price gets hammered. A sinking share price gets me way more juiced up than a rising one.

I handle it with more grace now.

When I was younger I would do a fire drill. A sinking share price led to manic-like research, which was only confirmation bias, and I would end up loading up on as many shares as I could. My subconscious would rationalize these actions by reverberating all of the famous Buffett and Munger quotes about buying as much as you can when you find a good thing.

Well, this has caused plenty of pain. My hands are still torn up from all the falling knives.

After touching enough hot stoves I have learned to tamper the dopamine rush when I see a name I like to be “one sale”. I am much more skeptical now and know what it feels like to buy and own companies that go from “Hated” to “Loved”. It seems that the shift happens instantly and for me happened almost in sync with my sell orders.

The stock market gods have a sick sense of humor.

When I have been able to stomach the continued downturn after my initial purchase, maintain a long time horizon, and trust that the business fundamentals win in the long run I have been rewarded on enough occasions to trust the process. I have also watched plenty of the names I bought plummet, sell my shares, and then watch the thesis play out with me on the sidelines.

Nothing teaches you better than real money mistakes.

I won’t say I am cured of my problem, but I still bristle when a company I like falls through the floor (as long as I don’t already own it). My starting sizes are much smaller and I no longer expect to time “the bottom”. I go in with the expectation that it is going to get worse before it gets better.

So, if I like the company, the economics, the track record, and the management, I hold my nose and buy a small enough position to matter but not big enough that I feel like I need to watch it every day.

I have found this process to be the one that fits me and that’s just fine.

With that being said, August’s pick is a name that is down 50% from all-time highs, just had a huge product flop, and has nothing to do with the AI wave of the future. I have been watching this company for years now and now the price is finally at a point where I am comfortable taking an initial position.

But before we get into it, let’s see how we are doing so far:

Like always, I make these picks with a long-term time horizon and each of them is not a big position in the portfolio so take them with a grain of salt and keep this in mind when reading ahead.

Please be advised, Wall St Gunslinger is not an investment adviser and does not give personal investment advice. All content is for educational and entertainment purposes only and should not be interpreted as anything other than such. Investing entails a lot of risks and should be managed appropriately. Please do your own research and consult with an investment professional before making any investment decisions. Thank you.