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Motley Fool Issues Rare “All In” Buy Alert
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2022 has been a year of extreme volatility, and quite frankly it’s been nerve-wracking to see the headlines each trading day.
The news cycle is constant, but the vast majority of the headlines are just noise. Being able to differentiate the hot air from the pertinent information is one of the most important skills for successful long-term investors.
Image source: Getty Images.
While analyst price targets do have the power to move a stock’s price in the near term, they are still individual opinions and usually have little bearing on the long-term performance of a stock.
In fact, studies have shown the average accuracy rate for price targets with a 12- to 18-month time horizon is just 30%. Do yourself and your portfolio a favor and pay little attention to these predictions.
Short-side hedge funds will often release glaring reports about the impending collapse of certain companies. These reports will garner significant media attention and often put pressure on the targeted company’s stock.
I believe long-term investors are best off ignoring these stories.
While these firms will correctly call out poorly run companies on occasion, most of them are simply looking to front-run the market. They will often open a short position, release a report stating the company’s in trouble, and then profit off the inevitable stock decline.
In my opinion, this is essentially legal market manipulation, and investors should tune out these reports.
The rise of “finfluencers” (financial influencers) has only added to the market noise. This includes “gurus” on TikTok, YouTube, Twitter, and even highly regarded television personalities such as CNBC’s Jim Cramer.
Investors need to understand these people are first and foremost entertainers. That’s why they often plaster their content with disclaimers that what they provide is not financial advice.
While there’s nothing wrong with consuming this type of content for entertainment purposes, you should under no circumstance make investment decisions based solely on these channels. It’s important to remember influencers are chasing viewership. They do not care about your portfolio’s returns and will create whatever content produces the highest levels of engagement.
Every three months, publicly-traded companies are required to share their financials with the world. This is the most important source of information for investors.
The easiest way to access these quarterly reports is through the company’s investor relations website, but you can also find them in the Securities and Exchange Commission’s EDGAR database. These reports will give you insight into the financial health of your companies and are the best resource for determining if the investment thesis is on track.
Companies will often issue press releases if they have important announcements that cannot wait until the next quarterly earnings report.
For example, on Nov. 7, Airbnb announced it will begin displaying transparent prices on its platform. The company has faced scrutiny for displaying deceptively low prices which oftentimes double at checkout due to obscure fees.
As an Airbnb shareholder, I found this to be really important news.
One of my favorite sources of information is interviews with senior leaders of the companies I’m invested in. This can include television interviews as well as interviews on online channels such as YouTube or podcasts.
While I would never base my investment thesis on an interview alone, they can offer an important glimpse of the drive, passion, and vision of a company’s C-suite executives.
While investing is often thought of as a game of intelligence, a significant part of the game is keeping your focus and emotions in check.
At the heart of this is understanding what news deserves your attention. Prioritize information coming directly from the company and its leadership. Other sources can still offer valuable insights, but it will require more effort on your part to separate those out from the distractions and noise.
Mark Blank has positions in Airbnb, Inc. The Motley Fool has positions in and recommends Airbnb, Inc. The Motley Fool has a disclosure policy.
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