4 ms·

That kind of stock picking is dangerous. First, it's easy to look around your little bubble and see that people are lining up at your local Chipotle or that pe

That kind of stock picking is dangerous. First, it's easy to look around your little bubble and see that people are lining up at your local Chipotle or that people use Google for solving tech support problems, and conclude that Chipotle and Google are taking off. They may be not be doing as well in other locales/sectors. And second, how do you know that these signs of promise aren't already priced in? If you can see signs that Chipotle is doing well, so can everyone else. And they have deeper pockets and better information-gathering capabilities than you do. Nowadays satellite imaging and computer vision are used to count the number of cars in parking lots of retailers to predict earnings! Lastly, there are innumerable complicating factors that the average retail investor has no idea how to account for. Maybe the stock price is low because their EBITDA is barely staying ahead of debt service payments. Did you read the SEC filings? Maybe they're having difficulties scaling their supply chain because they lost a big contract with a major supplier. Do you know enough about the domain to account for how much that should affect the stock price? Who knows, maybe there's even a seasonality factor to the number of people who go to eat spicy food, and your guesstimates will fall apart in 6 months. I wouldn't even bother with this kind of investing. It's just gambling. If you seem to be winning over time it's either because you're lucky or because the markets are going up in general. So just invest in index funds- you'll have lower volatility and you won't be betting against people who have nothing to do but sit around all day thinking about how to beat you.

Danihan 9y ago
I'm sure you're correct, all stock picking is dangerous though. I'd assert that my style is the least dangerous. > look around your little bubble I didn't (and don't) have a bubble. In fact, I frankly despise the Bay Area and SV because it constantly tries to put you in a liberal / wealthy bubble. >If you can see signs that Chipotle is doing well, so can everyone else. Apparently not, though. They doubled on IPO but most people were still VERY skeptical of them. I could see that they had 100% solved the problem of "fast casual" service. >Nowadays satellite imaging and computer vision are used to count the number of cars in parking lots of retailers to predict earnings! That should make you want to invest in the #1 company that manufactures satellite components.
- brianpgordon 9y ago
  > I didn't (and don't) have a bubble. In fact, I frankly despise the Bay Area and SV because it constantly tries to put you in a liberal / wealthy bubble. Almost everyone lives in a bubble. Unless you're a nomad traveling constantly, you mostly just see what's in the vicinity of your house or apartment. Your local area with the successful Chipotle is a bubble. Tech support is just one tiny slice of the uses for a search engine- a bubble. > Apparently not, though. They doubled on IPO but most people were still VERY skeptical of them. I could see that they had 100% solved the problem of "fast casual" service. Usually when people say this, there was some element that they didn't identify which made the investment riskier than they realized. It seems in retrospect that it was inevitable that the stock would go up, but if you could go back in time and get inside the minds of other investors you might be appalled to learn of the complicating factors that you didn't even take into account. Just think about it for a moment. Think about how much human effort and capital is poured into price discovery in the markets. Billions of dollars. Teeming trading floors, millions of lines of code, people all around the world running models and analyzing filings and biting their fingernails watching the ticker. Do you think you know better than they do what the price of Chipotle stock should be? The answer to that question may well be "yes" if you have expertise in the domain and you're experienced with investing and financial modeling. But it's probably not. > That should make you want to invest in the #1 company that manufactures satellite components. Which is what everyone else is thinking too. The trick is determining whether the price that the market has agreed on is too high or too low.
  - oreo81 9y ago
    You're just assuming that no one can see trends more effectively than you. The reality is that you have no idea how other people see the world, people could be way ahead of you and you'll never know it.
    - yellowstuff 9y ago
      For big companies thousands and possibly tens of thousands of professionals around the world are putting in long hours thinking about what the correct stock price is. They are meeting with management, buying proprietary research, and hiring PhDs to analyze quantitative data. Despite all that the market makes mistakes a lot, and sometimes a perceptive amateur might even be able to pick up on those mistakes. Still, I really doubt that many people are good enough at spotting trends to generate market-beating returns. If they could do it reliably they'd be billionaires.

Danihan 9y ago

I'm sure you're correct, all stock picking is dangerous though. I'd assert that my style is the least dangerous. > look around your little bubble I didn't (and don't) have a bubble. In fact, I frankly despise the Bay Area and SV because it constantly tries to put you in a liberal / wealthy bubble. >If you can see signs that Chipotle is doing well, so can everyone else. Apparently not, though. They doubled on IPO but most people were still VERY skeptical of them. I could see that they had 100% solved the problem of "fast casual" service. >Nowadays satellite imaging and computer vision are used to count the number of cars in parking lots of retailers to predict earnings! That should make you want to invest in the #1 company that manufactures satellite components.

brianpgordon 9y ago
> I didn't (and don't) have a bubble. In fact, I frankly despise the Bay Area and SV because it constantly tries to put you in a liberal / wealthy bubble. Almost everyone lives in a bubble. Unless you're a nomad traveling constantly, you mostly just see what's in the vicinity of your house or apartment. Your local area with the successful Chipotle is a bubble. Tech support is just one tiny slice of the uses for a search engine- a bubble. > Apparently not, though. They doubled on IPO but most people were still VERY skeptical of them. I could see that they had 100% solved the problem of "fast casual" service. Usually when people say this, there was some element that they didn't identify which made the investment riskier than they realized. It seems in retrospect that it was inevitable that the stock would go up, but if you could go back in time and get inside the minds of other investors you might be appalled to learn of the complicating factors that you didn't even take into account. Just think about it for a moment. Think about how much human effort and capital is poured into price discovery in the markets. Billions of dollars. Teeming trading floors, millions of lines of code, people all around the world running models and analyzing filings and biting their fingernails watching the ticker. Do you think you know better than they do what the price of Chipotle stock should be? The answer to that question may well be "yes" if you have expertise in the domain and you're experienced with investing and financial modeling. But it's probably not. > That should make you want to invest in the #1 company that manufactures satellite components. Which is what everyone else is thinking too. The trick is determining whether the price that the market has agreed on is too high or too low.
- oreo81 9y ago
  You're just assuming that no one can see trends more effectively than you. The reality is that you have no idea how other people see the world, people could be way ahead of you and you'll never know it.
  - yellowstuff 9y ago
    For big companies thousands and possibly tens of thousands of professionals around the world are putting in long hours thinking about what the correct stock price is. They are meeting with management, buying proprietary research, and hiring PhDs to analyze quantitative data. Despite all that the market makes mistakes a lot, and sometimes a perceptive amateur might even be able to pick up on those mistakes. Still, I really doubt that many people are good enough at spotting trends to generate market-beating returns. If they could do it reliably they'd be billionaires.