Current Market Conditions And A Stock Purchase

Hey, The Investor’s Podcast Network Community!

Because of the current market conditions with very few great businesses trading at great prices, I recently used a slightly different approach — I searched for companies with less appealing qualitative characteristics trading at more appealing prices. From that starting point, I looked at the recent stock picks from great investors I respect and where I simultaneously found the most insider buying. The resource I used for this was Datorama, which is completely free.

One stock caught my eye: Mohawk Industries, an American Flooring Manufacturer. Mohawk Industries has been punished by the stock market since early 2018, but I decided to take a position at $128 per share. This is not a pick that I plan to hold “forever” as most value investing books ask you to do. However, it’s a stock where I find decent value, so I’ll continue to closely monitor the conviction from insiders and other investors in the time to come. I’m slightly outside of my comfort zone, but I’m very excited to share what I learn in the process.

On an unrelated note, we’re soon launching a new podcast episode with billionaire and hedge fund manager Stanley Druckenmiller. In our research for the episode, Preston and I found something very surprising. The conventional investing wisdom is that you should wait for a value stock to bottom out, and whenever it starts to go up, that’s the time to buy it. The idea behind this is very simple. You don’t want to catch a falling knife or a stock that just continues to go down; rather than trying to time the bottom, you should wait for the stock market to send the stock price up before you invest. Legend investor Bill Miller said the same thing when we had him on The Investor’s Podcast.

However, Stanley Druckenmiller noted that since significant algorithm trading came into the picture the last 6-7 years, the price action was hard to use as a predictor of the future movement of a stock. For us retail investors, I think this is a very interesting statement if you include the price action in your investment process. I don’t think there is anything wrong with using candlesticks, 200-day moving averages, or other trading tools. But perhaps we should pay less attention to it than we used to and focus more on understanding the fundamentals. With more algorithms and Artificial Intelligence coming into the picture, price action in the stock market will become even more irrelevant in the short run.

Make sure to check out Preston’s free course on how to invest like Warren Buffett and get a firm grasp of the fundamentals.

Your Friends,

– – –

P.S. Preston and I are looking to setup a new podcast under the TIP Network, and we’re looking for the right host. The new podcast will be called “The Valley — by The Investor’s Podcast” and will focus on entrepreneurship, technology, and business in Silicon Valley. If you would like to apply for the position, head over to our TIP Network page for more information.