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Apprenticed Investor: Don’t Speak (part II)

Posted By Barry Ritholtz On May 25, 2005 @ 10:05 am In Investing,Markets,Psychology | Comments Disabled

Tscm_1 [1]The latest "Apprentice Investor [1]" column is up at TheStreet.com [2].  It looks at the "10 worst things investors say," (part 2) [3]. Alternate title: Highly ineffective habits of modern stockholders.

Here’s an excerpt:

6. ‘This stock looks cheap down here.’

Any time you hear this tidbit, you can bet that either 1) the stock just got
killed because of some awful news, or 2) it’s in the midst of a long and
relentless downtrend.

Don’t confuse stock price with value. This was especially true in 2001 after
all the prior splits. Sun Microsystems (SUNW [4]) is a perfect example. Monday’s closing price of
$3.89 may sound inexpensive, but don’t forget the five splits between 1995 and
2000; back them out, and the stock is $124.48. Same $13.25 billion dollar cap,
but it doesn’t sound so cheap minus the splits.

Here’s the full 5 for this week:

6. ‘This Stock looks cheap down here . . .’
7. ‘This fund did great last year.’
8. ‘I’m a Bull" (or "I’m a Bear")’
9. ‘I don’t want to take a loss.’
10. ‘I’ve got a great stock tip . . . ‘

Recall Part I last week [1] included:

1. ‘I love this company’
2. ‘I am a long-term investor.’
3. ‘I just heard on CNBC (or CNN or Bloomberg) that…’
4. ‘I don’t want to pay capital gains taxes.’
5. ‘I’m waiting for the stock to come back to break-even.’

Prior columns can be found here [1].


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/05/apprenticed-investor-dont-speak-part-ii/

URLs in this post:

[1] Image: http://www.thestreet.com/tsc/landingpages/apprentice

[2] TheStreet.com: http://www.thestreet.com/

[3] "10 worst things investors say," (part 2): http://www.thestreet.com/_tsccom/comment/barryritholtz/10224891.html

[4] SUNW: http://tools.thestreet.com/tsc/quotes.html?pg=qcn&symb=SUNW

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