What Owning STOCKS Really mean?
I'm sure you've all heard that investing in stocks is just about logic and no emotions at all but we all know that in real life this never works. I've invested in $AAPL because I like the fact that that the company is yielding over $70 billions in free cash flow every year and this number keeps increasing. And at the current stock price, I believe that it is a bargain. This is the logical part. What about emotions? I like the way that the company is being run although I would prefer if they would come out with a revolutionary product to replace the iPhone. I also like the fact that they are targeting only a niche and not making phones/computers for everybody. If you're selling to everybody, you're selling to nobody. The same thing can be saif about $BMW.DE . They know their customers and they know how to make money from them. So I love tApple for that and I would like it to be ahead of Samsung, Huawei or $GOOG . Nevertheless, I do appreciate the competition which encourages innovation. That's the emotional part.
Now, let's talk about the banking industry. When I invested in $JPM , it was because I liked the way the company has been growing. That;s the logical part. I also like the management. Jamie Dimon is one of my role models and Marianne Lake has been doing a great job, if she were to succeed Jamie Dimon(when he retires), I would be happy. That's the emotional part. When $JPM did the underwritings for the $BAYN.DE - Monsanto merger last year, I was happy about it because I knew that eventually, I will also profit from this. Since then, I have invested in $MS , $WFC $GS only for logical reasons. The stocks are undervalued and I believe that they will outperform the $SPX500 in the coming years. This is based on pure logic. When I saw that $JPM was the underwriter for the $BYND IPO, I was happy since it was a very successful IPO. As for $UBER , $MS and $GS were the lead underwriters and I didn't really feel anything. If you want a good investment bank to be the lead underwriter for your IPO, you have only three options: JPMorgan, Goldman Sachs or Morgan Stanley. You see the problem with that? I always win. I don't see any competition anymore. If you invest in a company, you should expect it to be number one. That's the type of emotional attachments you need.
Now, let's talk about short-term trades. I invested in $CELG and $APC as arbitrage trades. I know that these trades are not going to last more that a year. The only reason I invested in these two companies is because there someone else willing to buy at a higher price(in these cases, $BMY and $OXY ). Therefore, I am not so emotionally involved since I know that it is a short-term relationship.
Warren Buffett has often compared stock investing to dating and he's right about it. He said that investing in too many stocks is like having a harem of 100 women where you don't get to know anyone of them well enough, investing in a bubble is a like an oversexed guy in a brothel. These sayings might look funny but they are actually true. Before investing in any stock, you should think of it, like a date. You should make sure that they are the right one for a relationship. You should know how long you wish these relationships to be. You should also never marry your stocks. Even how much I love Apple or JPMorgan Chase, if these two companies start doing stupid things, I'll have to sell them. But if they continue on the current path, I'm willing to hold them for a lifetime.
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