“The Prophet” Returns

The Three Most Dangerous Words in Investing

 

• 
  
  
  

The common cliché on Wall Street is that the four most dangerous words in investing are, "This time is different."

But I've found a three-word phrase that's uttered just as frequently... and is arguably even more dangerous.

"I missed it."

You've probably grumbled these words before. Especially if you've ever passed on a stock you were considering buying... then watched as it marched to new high after new high.

The thing is, a great run higher doesn't necessarily mean it's too late to buy.

Today, I'll show you why this simple, three-word phrase can be so misleading...

In my decades as a value investor, I've seen it time and time again.

Value investors like me tend to look in the bargain bin for beaten-up stocks that are trading at 52-week (if not multiyear) lows. They get a sense of satisfaction from getting a better deal than the guy who bought it a month or a year ago.

It's a great strategy if – and this is a big if – you can correctly identify companies whose fundamentals turn around. The key here is to avoid value traps: the companies that never turn around, and thus their profits (and stocks) keep falling and falling...

But what about stocks that never really fall out of favor and end up in the bargain bin? We value investors often miss them.

Take Alphabet (GOOGL). In August 2004, the company went public at a split-adjusted $42.50 a share. By October, the price had already more than doubled. A year after that, it had doubled again. And two years after that – in October 2007 – shares were trading at $355. Today, they're up to around $1,200.

Sure, it would be great to have bought as soon as it went public. You'd be sitting on gains of more than 2,800% today. But even if you didn't buy on day one, you didn't miss it.

Heck, if you had sucked your thumb for a year, watched the stock go up 300%, and bought shares in October 2005, you still could have doubled your money in only two years...

If you made this mistake, well, join the crowd. I watched Google's shares go from $50... to $100... to $150... to $200... to $250... (You get the point.)

It would be one thing if I had done the work on it and concluded that it was outside my circle of competence (it wasn't) or was too expensive (it wasn't).

But that wasn't the case. I simply didn't do the work. Why? It's not because I was lazy. Rather, every time I looked at the stock, it was usually trading at or near an all-time high, so I kept telling myself, "I missed it" and moved on. If I had just bought what I knew was a great business at any of those points, I'd be sitting on a multi-bagger today.

Let me give you another example. My friend Chris Stavrou, who runs Stavrou Partners – a family office based out of New York – bought shares of Warren Buffett's Berkshire Hathaway (BRK-A), back when he was a stockbroker in the 1970s.

He started buying it for his clients around $400 a share – after it had risen more than 2,000% over the previous decade. But Chris didn't fall into the "I missed it" trap.

A decade later, he opened up his own hedge fund. By then, Berkshire was trading at an all-time high of $1,800 a share.

So did he say to himself, "Wow, this stock has moved up a lot – I think I'll wait for a pullback" or "Drat, I missed it"? No. He saw that it was a great company run by a brilliant investor and the stock was still attractive at $1,800. So he bought it for his nascent fund – and still owns those shares today, each valued at more than $300,000!

So learn this lesson well: Whether a stock is trading at a 10-year low or a 10-year high tells you absolutely nothing about whether it's cheap or expensive. Some stocks trading at multiyear lows are horrible value traps that are headed to zero. And some stocks trading at multiyear highs are going to be spectacular winners going forward.

The lesson here is, don't fall into the "I missed it" trap. Ignore where the stock price has been, do the work, and make a rational decision based on your assessment of where the stock is likely to go in the future.

He nailed the bottom of Netflix live on CNBC in 2012, before it rose more than 5,000%...

The man CNBC called “The Prophet” says he’d go ALL IN on THIS stock! 

Made 15 times his money on mall operator General Growth Properties…

Bought Amazon at only $56 per share….

And made a string of such startlingly accurate market predictions over two decades that CNBC nicknamed this man “The Prophet.” 

Today, he’s stepping into the spotlight to do it again.

Former hedge fund manager Whitney Tilson is sharing a radical move he’d make with his kid’s money…

He says,

“Investors could make an absolute fortune, and worry far less about their finances if they focused on finding one truly great stock idea and “back up the truck.”

To see Whitney’s #1 stock idea for 2020, simply click here to watch his presentations. You’ll get this stock’s name and ticker symbol, absolutely free.

  

About Empire Stock Investor

Empire Stock Investor is a monthly research service where Whitney Tilson and his team share their top investment recommendations, ideas, predictions, and warnings – in short, everything you need to know to beat the markets in the coming years.

 Note: He knows all about spectacular winners. He bought Apple at $1.50 and Amazon at $56... and he's nailed so many big market calls that CNBC dubbed him "The Prophet." Now, the man who predicted the dot-com crash, the housing bust, and more is holding a free online event tomorrow night...

WLK, SGEN & NKTR have all broken out to the upside and they each have big upside technical targets in play right now (targets inside the video).

The major indexes continued higher today, with IWM and MDY performing the best. We are quickly approaching some important resistance levels. We also discuss HELE, AAPL, SQ and more.

And,

We are down to less than 45 seats available for Wednesday's special live event (we started with 500!).

Trust me on this... you've got to be at this event... See The Top 10 Stocks To Kick Off 2019 With A Bang! I'll show you who is set to soar and crash next, live and for free!

Please register below ASAP:

http://markettamer.omnovia.com/register/43761546724998

Cheers to making 2019 the best year yet!

Jon

Bonus ContentSponsored

The ONLY Marijuana Stock You'll Ever Need...

Shocking news out of the marijuana industry, and Wall Street Insiders are going crazy. A massive 1.4 million sq. ft. super-greenhouse is coming online and could send a little-known 60-cent marijuana stock soaring!

Click here for more details...

The Only 8 Stocks to Own Today - FREE Research Report

Of the nearly 4,500 publicly traded stocks on the market, only 8 are now trading at an attractive price. These "8 Power Elite" stocks knock it out of the park year after year because they've tapped intothe 3 most powerful forces in the global economy.

Free Report explains why.

Watch America's #1 Trader Officially Become $1,050 RICHER in 15 SECONDS!

And then $940 RICHER in 11 seconds... $1,260 RICHER in 8 seconds... and $988 RICHER in 7 seconds! You've never seen anything like this. And you may NEVER see it again! His secret to becoming a multimillionaire is so easy that anybody can do it!

[Full story...]

Is Your Trading Foresight 2020? Get Our 2020 Futures Outlook Guide

Commodity market foresight is 2020 with our new 2020 Futures Outlook Guide, a complete resource for strategy and insight to help inform your commodity futures trading in 2020. Through detailed research, learn how markets are predicted to perform in the new year with an in-depth performance review of key markets, including Grain, Energy and Metals.

Download Your Complimentary 2020 Futures Outlook Guide TODAY!

Tiny Massachusetts Company Awarded $75 Billion Patent

Tiny biotech's breakthrough proves it's possible to remove cancer cells from sick patients. Bill Gates says new discovery is so powerful it could "help humanity." This under-the-radar company is not yet a household name.

Our research proves that anyone who gets in now could turn $1,000 into $1.57 Million >>>

• Wealth Path Coaching
 
• Glossary
 
• Testimonials

×

Let's Take an Example: If You Invested $100 in Apple's IPO, This Is How Much Money You'd Have,  Now... 

Extreme patience would have been required to stick with Apple through the 1990s, but it would have been worth it.

 

Apple (NASDAQ:AAPL) is one of the most fascinating business success stories of all time. It would have been impossible to imagine in the late 1970s how two guys (Steve Jobs and Steve Wozniak), making circuit boards in a garage, were starting down a path that would create one of the most iconic consumer brands in the world.

Today, Apple has 1.4 billion active users around the world, 137,000 employees, and $260 billion in annual revenue. But how much money would you have in the stock if you bought at the IPO? 

The results of patient investing

Apple first sold shares to the public on Dec. 12, 1980, at $22 per share. The stock has split four times -- three times at 2-for-1, and one split at 7-for-1. This means you would have received two shares for every one share, or seven shares in that one case. The way stock splits work is that you receive more shares but the stock price is cut proportionally, so the value of your investment stays the same. 

If you had bought just one share of Apple, you would own 56 shares today after the stock splits. Those shares would be worth $14,896 at the current price of $266 per share. 

A $100 investment would have purchased 4.54 shares at the IPO price. After the stock splits, you would now be the lucky owner of 254 shares of Apple, which would currently have a value of $67,564.

By comparison, one of the first Apple computers ever made was recently auctioned off by Christie's for $477,000. The Apple 1 originally retailed for $666.66 in 1976 and only 200 were made. 

The return in Apple stock doesn't sound like a lot since we're talking about one of the greatest tech companies ever. However, that's only for a relatively small investment of $100. In percentage terms, Apple stock has compounded at 18% per year since its IPO price. That means that if you had invested $10,000 in Apple in 1980, you would have about $6.7 million.   

Dividends would have padded your investment return somewhat. Apple first paid a dividend in 1987, but financial trouble caused the company to suspend dividend payouts in 1995. After selling millions of iPods, iPhones, and iPads, and raking in billions in profits, Apple reinstated the dividend in 2012. The company currently distributes a quarterly payout of $0.77 per share. With 254 shares, you would be earning $782 every year in dividend income -- a nice return on an original investment of just $100.

Deep faith in the Apple brand would have been required

It wouldn't have been easy to hold Apple all those years. In fact, it would have been a smart move to sell Apple and buy shares of Microsoft in the early 1990s. After Steve Jobs resigned from Apple in 1985, the company entered a dark period. Management during those years focused more on profits instead of making great products, as Jobs explained in the biography Steve Jobs by Walter Isaacson. Apple lost a significant amount of market share to Microsoft during that time.

But most of us know how the story ends. Jobs officially returned to the company in 1997. He discovered the brilliant design work of Jony Ive, who had been working for Apple since 1992. Following the philosophy that less is more, the duo went on to design incredibly successful products and fulfilled Jobs' vision to change the world. 

At the heart of Jobs' design approach was to make technology accessible for everyone. Some thought it was a crazy idea that people would find any use for a computer in the early 1980s, but the Mac changed the idea of what a computer could be. Jobs' thinking influenced the design of the iPod, which was first introduced in 2001. It was the first user-friendly MP3 player that features a simple interface, a scroll wheel to navigate, and the built-in support of iTunes to legally buy all your songs. The built-in user base of the iPod laid the foundation for Apple to sell tens of millions of iPhones and iPads later on.

Jobs' ideas have filtered through the company so completely that it has even influenced the design of Apple's new campus, Apple Park, in Cupertino, California.

Apple is not floundering in the second post-Jobs era the way it did between 1985 and 1995. Apple stock is currently hitting new all-time highs, as the company sees strong growth from its wearables and services segments. Its user base also continues to gradually expand around the world each year. 

Apple's ongoing success after Jobs' death in 2011 is a testament to his leadership skills. Despite the fact that Jobs was famously difficult to work for, it's obvious that he established a culture for excellence that should carry Apple forward for many years.

Most of us were not fortunate enough to buy Apple at the IPO, or even when Jobs returned in the 1990s. But that's OK, because Apple still has plenty of growth potential, especially in new services like Apple TV+ and advertising. A small investment could still be very rewarding over the long haul.

10 stocks we like better than Apple

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Apple wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

Investing In Facebook, Apple, Netflix And Google Is A Big Mistake Right Now, Says One Portfolio Manager

Forbes Staff

Markets

I cover breaking news, with a focus on money and markets.

For FANG stocks, growth is increasingly coming at

Topline: High-growth technology behemoths like Facebook, Apple, Netflix and Google—the FANG stocks—have boosted the market in recent years, but their skyrocketing valuations have led investors to ignore the costs and risks of these businesses, according to a portfolio manager at a $13 billion dollar investment firm.

• “Investing in FANG stocks today is similar to stepping on the gas while you drive around a bend and admire the view in the rear view mirror,” says Micky Jagirdar, a senior vice president and co-portfolio manager of Global Concentrated Strategy at Ariel Investments. “There’s too much focus on past performance and growth.”
• These giant stocks have a disproportionate influence on the overall market, and the hype around them has resulted in “crazy investor behavior with respect to FANG valuations,” says Jagirdar. 
• He points out that while these big tech companies have enjoyed impressive revenue growth in recent years, it hasn’t translated to free cash flow growth or good dividend yields. Since investors traditionally focus on earnings-per-share or price-to-earnings ratios, they’re missing important metrics such as capital expenditures, which show that growth is coming at a cost, Jagirdar says.
• With shares of FANG stocks trading at high premiums in an already-overvalued stock market (the four companies have a whopping average price-to-earnings ratio of 64, while the S&P 500’s ratio is 22) it’s clear that these technology giants will need higher spending to keep up their growth momentum, he describes.
• Much of the growth in FANG stocks is due to “valuation expansion” rather than the companies’ underlying businesses—and that’s another reason why free cash flow has been “extremely meager” in comparison to strong revenue growth. In other words, these companies are spending more and more to keep up with higher revenue expectations.
• Overall, most investors are under-appreciating the magnitude of capital investment required for these big tech companies to achieve such high levels of revenue growth, says Jagirdar. “In all cases the bottomline is that while the growth is appreciated the costs are not.”

Facebook: Facebook’s main business is advertisement-based, and that line of business has gone untested against an economic downturn, Jagirdar notes. With Facebook’s core platform starting to hit a wall, the company has looked to add users and monetize its family of apps such as Instagram, Messenger and WhatsApp. What’s unclear due to lack of disclosure, Jagirdar says, is how much Facebook has been able to monetize Instagram. WhatsApp has proven to be a “poor” return on investment at this stage since Facebook has yet to figure out how exactly it will monetize the app, Jagirdar says.

Apple: Despite growing its services offerings in recent years, to nearly 20% of revenue today, operating margins declined during that period even though the “whole premise of services was to have better margins than with iPhone sales,” Jagirdar says. As Apple touts its growth prospects in China, the cost of a new iPhone has actually gotten cheaper than a year ago, which offsets some of that optimism. Apple is also quickly losing its services advantage, Jagirdar says, as offerings like the app store, Apple Music and Apple TV+ are no longer exclusive to Apple and instead face plenty of competition.

Netflix: With the streaming wars continuing to heat up, Netflix has had to substantially ramp up its spending in order to produce more original content, and fend off competition from rivals. To achieve its 127% growth in revenue since 2016, the company has had to triple its free cash flow burn over that same period. Having already penetrated most developed markets, the company is “underappreciating” the much lower propensity of emerging markets to spend on subscription services, Jagirdar says. “Netflix is a prime example of user-led revenue dominating investor mindsets—it’s blocking cognition on mounting losses in order to achieve that level of addiction: ‘Netflix & chill.’”

Google: Like Facebook, Google is also still an advertisement-dominated business. But the monetization from user growth in developed markets isn’t what it used to be say, five years ago, according to Jagirdar. YouTube, which has been a hugely successful acquisition for Google, has its biggest growth prospects in India, for example—but poorer consumers there have less money to spend on ads. Much like Netflix, Google is also realizing it has to choose between growth or margins—but not both. The company has subsequently had to rely on mergers and acquisitions as well as increased capital expenditure to maintain its high-growth levels. But with traffic acquisition costs outpacing revenue growth, Google’s margins are down to 22% from the over 30% level six years ago.

Get the best of Forbes to your inbox with the latest insights from experts across the globe.

Follow me on Twitter or LinkedIn. Send me a secure tip.

Sergei Klebnikov

I am a New York—based reporter for Forbes, covering breaking news—with a focus on financial topics. Previously, I've reported at Money Magazine, The Villager NYC, and The

…

Loading ...

Also on Forbes Markets

UNICEF USA BrandVoice: Seven Things You Should Know About The Coronavirus Outbreak

Best Portable Chargers

2020 Forbes Media LLC. All Rights Reserved.

• AdChoices
• Privacy Statement
• Terms and Conditions
• Contact Us
• Jobs At Forbes
• Reprints & Permissions
• Forbes Press Room
• Advertise
• 
  
  

Attention ReaderYou Can Access Your “Sixteen(16) Hour Jump Trade” Immediately After This FREE Training Event

See How Two Legendary Traders Routinely Grab 426%… 780%… and 883% + gains with…

16 HOURJUMP TRADES

We Begin In 00:08:39

Register now to watch this profit masterclass and grab your first trade!

Hosted by World Renowned Stock Expert Roger Scott and Internationally Acclaimed Currency Market Specialist Rob Booker, You Will:

• See how to snatch 426%... 780% and even 883% gains in the currency market -- without Forex trades, risky futures or penny stocks. You’ll sleep so much better when you can turn every $500 into $4,415 while you keep your cash safe.
• Discover how just three of these 16 Hour Jump Trades could make you $2,601,752. This isn’t a far-out prediction… it’s already happened! You’ll see the exact stocks, the specific trades, and you’ll discover why it could happen again with the next three “16 Hour Jump Trades.”
• Find out the four specific times each and every month that “16 Hour Jump Trades” go active… so you’ll be able to set yourself up for huge gains before the market moves— and smile all the way to the bank.
• Be one of the very first traders to see Roger’s “C.S.I. Method” in action. It’s been a total secret until now and it’s how he guarantees quick and easy paydays with “16 Hour Jump Trades” -- 4 times a month.

Roger is a former hedge fund trader with 25 years experience who managed over $900 million at one point. He ran his fund with the current economic advisor to President Trump, and his clients have included one of the ten wealthiest families in America.

He’s been featured on CNBC, CNN, Forbes, Bloomberg, and Fox Business...

And just one of his strategies turned $10,000 invested in 2010 into more than $3.31 million today.

He’s never teamed up with anyone to teach his strategies… until now.

He’s an Internationally published, #1 Bestselling author, who during the Great Recession, was a CTA who turned a profit on his $8 million FX fund.

That’s why he’s been featured on CNBC and quoted by The New York Times.

You can listen to him on his wildly popular podcasts Trader’s Podcast, Trading for a Living, and Trader Radio, where he interviews the world’s best traders...

But you can only get access to Roger and Rob’s closely guarded secrets for FREE when you register and watch this incredible training.

Web begin in 

08

MINUTES

39

SECONDS

• 

*Stock Advisor returns as of  1 January 2020

We use cookies for an optimal website experience! 

***Past performance is not a predictor of future results. All investing involves risk of loss and individual investments may vary. The examples provided may not be representative of typical results. Your capital is at risk when you invest — you can lose some or all of your money. Never risk more than you can afford to lose.