Trixies

Trust me, I am laughing at myself more than you’re laughing at me for being caught with my pants down in this prison called the stock market. It’s not like I loaded up in a bunch of small cap crap. I was cordially invested in “the very best companies in America”, with markets caps ranging from 5 to 15 billion dollars. Why was I in these stocks and continue to lose money in them for 8 consecutive weeks?

Programming.

For a moment, I will blame other people for my mistakes; but ultimately, I am responsible for my own actions.

1. The vulture capitalists live in a fantasy land of lies. They’ve bid up these private companies to the point of grande perversion. Nearly 70% of these new IPOs lose money, yet possess price to sales ratios that resemble the very best companies at their peak. I was given the task to find a company that went from large operating losses, in hyper growth phase, to making money, conforming with traditional valuation metrics, with its share price outperforming the markets. It was a much harder task than I thought it would be. I found a handful of stocks, like EQIX, DDD, TSLA and SPWR. But solar was utterly wrecked a few years ago, so they’re disqualified.

The point: there isn’t any historical precedence for success when investing in companies that are losing money.

2. Investment banks accepted the private markets absurd valuations and dumped it on the investor.

And lastly, the analysts came out with rave reviews, justifying the high valuations with excellent sophistry.

Come to think about it now, and of course in hindsight, there is rarely a reason to buy a stock that has operating losses. The reason why these stocks are being mauled is because the street has decided to punish any company who loses money to the point of barbarism. The capital markets will close on these companies soon and they will have a very difficult time raising money to keep operations going.

All of these growth stocks are down a good 30-50%. Perhaps they will bounce in May; but can we ever trust them again? The way these stocks dropped at 9:40 am is something I will never forget, for as long as I live. I was keyed in on NOW like a hawk, considering it the tell for the day, since they just reported great earnings. The stock went from +2 to -8 or -14% in a matter of minutes. There is no way human beings could’ve done that. Some asshole algorithm nailed that stock to the wall, and everything followed with it. WDAY, DATA, YELP and of course FEYE went straight down the chute. These stocks traded like bank stocks at the height of the Lehman collapse, loaded with toxic paper and too much debt.

These tech stocks are dead. They’re going all the way to single digits; that’s how they’re trading. It’s more than just margin calls or crazy short sellers. This is a high conviction trade for people who know better, especially me. Period, end of story; it’s time to take the lumps.

 

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