The Danger of One-Decision Stocks | The Acquirer's Multiple®

During their latest episode of the VALUE: After Hours Podcast, Carlisle, Taylor, and Vitaliy Katsenelson discussed The Danger of One-Decision Stocks. Here’s an excerpt from the episode:

Tobias: I was at an Easter lunch over the weekend, and one of the guys, they said, “I’ve traded three crypto cycles.” We’re into the degenerate phase for this crypto cycle. [laughs]

Jake: Really?

Tobias: So, that’s where we were in cryptos.

Jake: Those happened fast.

Tobias: Yeah, it was. Cryptos.

Jake: The digital [crosstalk]. Cryptos. Yes. Like, dog ears.

Tobias and Vitaliy: Yeah.

Tobias: So, I took to everybody what they were holding. Everybody’s got a big chunk of Nvidia. They were all kicking themselves, because they missed out on SMCI. Is that the Silicon–?

Jake: Yeah.

Tobias: Got the ticket wrong there. One of the hotter kind of–

Vitaliy: It’s interesting. I became analyst. I was in industry in 1995. But I joined this company in 1997, and I was analyst at the time. I observed the dot com bubble, firsthand. I was meeting with somebody, and at the time the guy said, “You can’t go wrong owning.” And he listed like a series of stocks. There was Cisco’s, Oracle’s, Dell’s. Maybe AMD was part of the pack. And like, “You can’t go wrong owning the stocks.” He was right for about maybe two years, maybe for a year. And then they all collapsed. You obviously know how the story ended. So, it’s this mentality that you can go wrong on these stocks. And by the way, you can go back to NIFTY 50s, and it’s the same thing.

Jake: One decision.

Vitaliy: No, you’re right. One decision stocks, which is a first level thinking, because you only– Actually, no, it’s not even first level thinking. It’s zero level thinking, because all you’re looking is the stock price. Nothing else, okay? And the stock price tells you any story you want to hear, like, how Nvidia. By the way, the irony of this whole thing is internet was real. Like, Cisco still probably hasn’t recovered or maybe barely recovered from what happened 25 years ago.

Jake: I think it’s still under, if I remember right. But I could be wrong.

Tobias: Cisco got cheap a few years ago though. I think Cisco was cheapish. But yeah, you’re right, it’s not in terms of the stock price.

Vitaliy: No, it’s not. I’m just talking about stock price. In other words, Cisco was a great business in– Here is the punchline, Cisco was a great business in 1999, and it’s good business today still. It was incredibly overvalued in 1999, and it took a long time for the company to grow into its earnings. So, how much you pay actually matters. When you a one-decision stock, people actually ignore how much they pay. They just look at the chart actually. Nothing else.

Tobias: Yeah. You always feel good buying those stocks right at the point that you buy them, and then you regret it down the road. Whereas value stocks are the other way around, you feel terrible when you buy value stocks, you feel like you made a terrible mistake usually when you wake up the next day and it’s down another 20%. When you get disgusted at it and you can’t check the ticker anymore, that’s when it comes back to life.

Vitaliy: Yeah. Universal love for stocks is not cheap. When somebody hates something that hate is cheap. If everybody loves the stock, the stock is not cheap, and therefore, the returns won’t be good either in just general.

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