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  • Originally posted by mgchan View Post

    This is why newer companies considered tech are such good investments. The big companies are afraid of cannabilizing their own products or disrupting existing customers, so they hold back new development, leaving them prone to disruption.

    See Zoom vs Webex/Teams, MongoDB vs Oracle, Zscaler vs Palo Alto Networks, Crowdstrike vs Symantec. Focused companies can achieve the most overall growth while adapting to the modern environment without requiring support for legacy systems.
    What you describe doesn’t sound that different from momentum investing and technical analysis.

    Same argument for picking the better ones, leaving out the underperformers, index is easy to outperform.

    Thats not my experience over a 20 year period. The returns from US equities have been amazing in the last decade. If I could compound at the last 10 year SP500 rate for the next 10 years, I would be very happy.

    As an aside, I am taking the other side of your position: am overweight EM, resources as of 1/5/20. I am looking at European equities, UK, Spain, small cap entry in the next year or 2.

    Always other side to the market. We all have an opinion, but I don’t know who will be right. Make sure you will be ok if you are wrong.

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    • Originally posted by mgchan View Post

      So you call them "tech" even though their core tech is 50 years old. My point is, how are they at all comparable to Nvidia or Shopify, also tech?

      IBM and Xerox are also anything but growth stocks. Another reason I stay away from even indexing based on the market cap, I don't want to invest in them either. I'd rather own a fast growing company like LGI Homes (LGIH), which is anything but tech.
      Not at the time was the point. That is why I suggested the chart comparison. Growth/tech has a shelf life. They were growth leading edge tech stocks. Case studies show mistakes they made. Just and illustration.

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      • Originally posted by Tim View Post

        Not at the time was the point. That is why I suggested the chart comparison. Growth/tech has a shelf life. They were growth leading edge tech stocks. Case studies show mistakes they made. Just and illustration.
        Not sure where I suggested that companies grow indefinitely. There's a period of pre-adoption, when it tries to establish that it has a viable product. The ones that make it to an IPO generally go through a period of hypergrowth as they prove their success. This is usually a period of 3-10 years. Then there's often a period of stagnation, followed by an eventual decline. Occasionally, you have a company that declines then comes back, like when Dominos became essentially a tech company, or companies that are able to move into new areas for growth.

        Because the companies report earnings and revenue and free cash flow each quarter, and typically provide guidance for a quarter that is already half over by the time it provides the guidance, it is usually quite clear that a company is no longer growing at the same rate. Kodak, Nokia, Xerox, and the like didn't have their sales fall off a cliff; they stopped growing then started to decline. Once that happens, the growth label no longer applies. The losses come when one holds on despite the investment thesis changing from a growth stock to a turnaround.

        Value stocks only really pay off in the long run because the company starts growing again. While occasionally market sentiment will change and award a higher valuation to the same company, hoping for that is just trading. If you're happy with a 3% dividend and the hope of a turnaround then that's great, but it's unlikely to result in significant outperformance.

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        • Originally posted by Dont_know_mind View Post

          What you describe doesn’t sound that different from momentum investing and technical analysis.

          Same argument for picking the better ones, leaving out the underperformers, index is easy to outperform.

          Thats not my experience over a 20 year period. The returns from US equities have been amazing in the last decade. If I could compound at the last 10 year SP500 rate for the next 10 years, I would be very happy.

          As an aside, I am taking the other side of your position: am overweight EM, resources as of 1/5/20. I am looking at European equities, UK, Spain, small cap entry in the next year or 2.

          Always other side to the market. We all have an opinion, but I don’t know who will be right. Make sure you will be ok if you are wrong.
          It's not momentum investing in the technical sense. I don't know the first thing about charts or moving averages. It's following business momentum. Actual sales resulting in cash flow for the company which may be converted to earnings or working capital to expand. I was accumulating a position in MongoDB when it did nothing for 6 months because they just kept reporting 60% revenue growth. Crowdstrike lost over half its value from the initial post IPO peak, but kept reporting 85% growth. Eventually, the market valuations even out and it's growth in the underlying business that drive returns in the long run.

          I've been wrong plenty of times, usually when buy into a company thinking that their growth will continue but it doesn't. But I'm selling when growth is "only" 30% if it was growing at 50%+ previously. If I'm happy with 40% for a company and it stays stable for a long time, I'll just keep holding. But I don't hold on through multiple quarters of declining revenue just because I'm supposed to be a long term investor.

          Luckily, being right just a fraction of the time with growth investing can overcome being wrong many times.

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          • Originally posted by StarTrekDoc View Post
            mgchan I get what you're saying; but betting on the right horse is -- well --- betting. Using whatever metrics you want, there's a fair amount of uncertainty in growth companies and that's why it's called Venture Capital/seed money for many of these tech. Out of the 2000 tech, what has survived? Palm? AOL? Pets.com? myspace? HD-DVD consortium?

            The streets are littered with good company strategies and teams but just didn't run the gauntlet or win the popularity contest. It's easy to point to the winners like Amazon, Netflix, Google and darlings like Zoom. Back in Feb, I was thinking my post-IPO purchase of zoom was such a dog that I almost dumped it; then COVID happened and suddenly I'm a genius? Nah, got lucky after my laziness and vacation forgot to sell it in reality.
            Zoom was a good investment even before the pandemic, growing at 70%+ and approaching $1b a year in revenue. But to point out how out of touch the so-called experts are, just before the reported earnings last month a Morgan Stanley analyst said she was expecting them to report $200 million which is basically what Zoom guided for before any pandemic. There was a full 6 weeks of pandemic fueled growth where everyone and their grandmother learned what Zoom was, yet she couldn't see that impacting revenue at all. Anyone with half a brain should have realized they'd do more than they were expecting (even beyond what they usually beat guidance by). Of course they came in way ahead of estimates, by 60%.

            https://www.barrons.com/articles/zoo...ow-51591030572

            AOL clearly had declining revenue growth by the early 2000s. Pets.com never had any appreciable cash flow. I'd never invest based just on stock price action. Palm also had a period of growth slowing where action could be taken. I don't know anything about MySpace's financials since I'm pretty sure they were private the whole time, but they didn't just cease to exist. I'm not sure what a disc format has to do with any of this.

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            • Without another stimulus we are up the creek
              Tens of thousands airline employees will be unemployed Oct 1

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              • Is anyone waiting for a pullback or just keep plowing funds into these insane valuations knowing the it's going to slow?

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                • Originally posted by burritos View Post
                  Is anyone waiting for a pullback or just keep plowing funds into these insane valuations knowing the it's going to slow?
                  Which insane valuations?

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                  • Originally posted by burritos View Post
                    Is anyone waiting for a pullback or just keep plowing funds into these insane valuations knowing the it's going to slow?
                    I'm plowing forward full steam, I think Tech is going to be the huge winner. as does practically everybody else. Its also fairly immune to volatility to the 2020 election IMO.

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                    • Originally posted by Jack_Sparrow View Post

                      I'm plowing forward full steam, I think Tech is going to be the huge winner. as does practically everybody else. Its also fairly immune to volatility to the 2020 election IMO.
                      When politicians talk about taxing the wealthy they are also talking about taxing the wealthy companies. That might hurt their bottom line. Or at least the markets perception of what it would do is what matters.

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                      • Originally posted by Lordosis View Post

                        When politicians talk about taxing the wealthy they are also talking about taxing the wealthy companies. That might hurt their bottom line. Or at least the markets perception of what it would do is what matters.
                        Most companies will just increase spending to lower profits and thus avoid those taxes.

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                        • Jack_Sparrow You don't think the dems will try to take out the F in FAANG?

                          I think any uptick in interest rates could cause the NASDAQ to come falling to the earth. The Fed says it's non-partisan, though.

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                          • It's only a matter of time before Amazon has to spin-off its AWS cloud division. Facebook will likely have to break up into Instagram, Whatsapp etc. Monopolies can't (and shouldn't) last forever.

                            However, that doesn't mean the value of the companies will go down, you will just get additional shares in those when they break up, which I would guess happens in less than 5 years, maybe a lot sooner when there's a new administration.

                            The 4 headless horsemen of tech will be going to Congress in a few weeks I believe.

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                            • Originally posted by burritos View Post
                              Is anyone waiting for a pullback or just keep plowing funds into these insane valuations knowing the it's going to slow?
                              No change in investing when I can.

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                              • took 5 months for the S&P to be up YTD. still waiting for it to drop another 20%.....

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