Episodes

Be Greedy and Let Your High-Quality Winners Run

Episode #369 | July 8, 2024

Episode #369 | July 8, 2024

Be Greedy and Let Your High-Quality Winners Run

In This Episode

On this week's Stansberry Investor Hour, Dan and Corey are joined by their colleague Whitney Tilson. Whitney is the lead editor on Stansberry's Investment Advisory – Stansberry Research's flagship newsletter – as well as Commodity Supercycles and his free e-letter Whitney Tilson's Daily. Once dubbed "The Prophet" by CNBC for his prescient calls, he joins the podcast to share some financial wisdom with listeners.

Whitney kicks off the show by talking about the value of attending investing conferences and other company meetings. You can gain insights, talk to fellow investors, share ideas, and either discover promising trends or discover which trends are "bombs." Whitney emphasizes that avoiding calamities is just as important as finding the next big investment idea. He shares his experience with short selling and how he actually lost a lot of money by employing the technique. This leads to a conversation about value traps – what they are and how they can lead to ruin...

For 99% of people, I would suggest not actually short selling or buying puts or anything like that. But definitely develop the skepticism and the tools short sellers have to identify value traps or worse – you know, frauds and so forth. Because the key to successful long-term investing is not only making successful investments but also avoiding bad investments that can really sink you.

Next, Whitney details his storied history with Netflix and why he went from shorting the company to investing in it. Ultimately, he found a 90-bagger. But he sold the stock early and left money on the table. The "most important lesson" he learned from that experience is to let your winners run. As Whitney explains, that's why index funds outperform almost all active managers over a long period of time – because they never sell their winners.

Anyone who tells you, "Don't be greedy. Pigs get fed. Hogs get slaughtered," don't listen to that. You must be greedy. If you stumble into a Netflix and an Apple, you must let your winners run. As long as the story stays intact, as long as they're still crushing it... don't get hung up on short-term valuation or the fact the stock has gone up a lot. You must be super greedy. Because just a few winners like that, literally in a lifetime, is all you need to be super successful and build generational wealth.

Finally, Whitney hammers home that investors should be selective with stocks and only buy the best-quality businesses. Many of these companies see large drawdowns at some point, which can be perfect buying opportunities... even if you're not able to find the exact bottom. Whitney predicts that Nvidia could see a sizable drop since the company is relatively young and volatile. After, he shares that value stocks, small-cap stocks, and international stocks are all at 20-plus-year lows. This extreme underperformance presents an opportunity for investors wanting to diversify their portfolios. And Whitney also breaks down how to spot a high-quality business that may be struggling in the short term versus a value-trap business that will only head lower...

Be a little patient and look for once-great businesses that are facing some short-term headwinds. And the key is, you've got to be smart and figure out: Are these short-term headwinds or is this business permanently impaired?... If you can't make those judgments, then you should instead just buy index funds. And there's no shame in doing that.