Trade vs long term position
Marty, first of all thank you for the mid session update today, really helpful. When you went through the Fortinet chart you mentioned that it is a position that you’d hold for the long term in a portfolio. I think you then said as opposed to something like UPST and AFRM which are trades. I just wondered if you could expand on that second point? Do you mean trade from a technical or fundamental perspective or both?
Hope that makes sense.
Andrew
Andrew,
I believe some stocks can be held in a portfolio for many years. Other stocks may have fantastic momentum for a short period, and then fade for one reason or another.
An example would be AAPL a great long term hold vs. PALM which was a great trade, until the competition crushed it. A more recent example might be a stock like PTON which was a great trade in 2020. But, that is not a stock that will stand the test of time. It was a good stock to trade in 2020 but not a great stock for the longer term.
I own AFRM and UPST, and believe they are both fabulous companies. I am also not under any delusion that they will be stocks that I bequeath to my family😂. I expect them to have a nice run, and we will make good money from their growth. But, at some point they will make a top and selloff.
Most of the growth stocks that we (growth investors/traders) like to trade/own only have their growth spurt for six to 24 months, and then they level off. That is why it is nice to make money off of growth stocks while they are in their "super growth" phase. But, growth stocks are going to selloff quickly when the growth slows. That is the danger with owning/trading growth stocks. We need to get out before they reach their peak and selloff.
FTNT is a stock I believe can be held for the long term. I may be wrong here? But, I also believe CRWD and ZS can be long term winners. But, even with these cybersecurity stocks, when the growing slows they will level off to some degree.
I buy stocks based on the fundamentals AND technicals. But, I sell only using the technicals. Because everything will look great at the top. The stock will sell off long before the fundamentals deteriorate.
I hope this answers your question.
Regards,
Marty