The recent buyers need to leave
The short term movements of the stock market are strongly influenced by the emotions of investors. That’s exactly the wrong way to make investment decisions, but it happens every day.
For the last several months the “fear of missing out” has driven investors, who previously held large cash positions, to come into the market. Their reasons for buying and their commitment to owning are both suspect. Rather than having the foresight to buy before a big advance, they’re chasing an upward trending market after significant gains have already been made.
Why were they out of the market previously? That’s simple. They feared losses. But after months of not seeing any losses, this skittish group gradually got more comfortable with buying.
They were motivated by fear when they were out and they were motivated by fear when they got back in. It shouldn’t be a surprise when they’re the first ones to sell out of fear. I call them tourists. They’re only here briefly and they don’t really know the area.
For every share they sell in fear, that share gets bought by someone else who’s made of sterner stuff. These are the rightful owners. Just as the brave buyers in 2022 were paid handsomely in 2023, the buyers over the next few weeks will enjoy the next leg up. But only after all the tourists have gone home.
Dock Street focuses on companies with long-term advantages. We don’t try to avoid the short-term gyrations of the market, because that’s the surest way of missing out on the power of compounding over long periods of time.
Best regards,
Evan McGoff
Dock Street Asset Management, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. You should not assume that any discussion or information contained in this letter serves as the receipt of, or as a substitute for, personalized investment advice from Dock Street Asset Management, Inc.
It is published solely for informational purposes and is not to be construed as a solicitation nor does it constitute advice, investment or otherwise.
To the extent that a reader has questions regarding the applicability of any specific issue discussed above to their individual situation, they are encouraged to consult with the professional advisor of their choosing.
A copy of our Form ADV Part II regarding our advisory services and fees is available upon request.
Our comments are an expression of opinion. While we believe our statements to be true, they always depend on the reliability of our own credible sources. Past performance is no guarantee of future returns.
