One Winner, One Rough Day, and the Opportunity in It
One up 25%, one down double digits on the day. Here's what I'm doing.
Dear Reader,
A quick but important portfolio update. I wanted this in front of you first thing this morning, before the opening bell, so you’d have the full picture before the trading day starts.
This week, two of the companies in our model portfolio reported results, and they could hardly have gone more differently. One turned in a strong quarter that’s pushed its shares higher, and our position is up about 25% since we recommended it. The other had a rough day, selling off close to 18% yesterday.
The good news is the easy part, and we’ll get to it, because good news deserves its moment. But the main reason I’m writing is the one that fell.
Partly to get ahead of it, so you’re not staring at a red screen wondering what on earth happened. (After all, showing up on the down days, not just the up ones, is a big part of what I do here, whether you’re a paid subscriber yet or not.)
And partly to tell you something more useful: a drop like this, on a company whose long-term story hasn’t changed, isn’t a problem for us. It’s an opportunity, all the more so because we came into this name near its lows to begin with, not chasing it at the highs.
And there’s a second reason we’re able to treat a day like this as a chance rather than a threat: how we buy in the first place. If you’ve been with me for a while, you know I never put on a full position all at once. We build them in stages, deliberately, into weakness, the approach I laid out in “Why I Never Go All-In on a Stock.” So when the market slams one of our names, a frightening headline number rarely lands on us the way it lands on someone who bought their whole position at the top. It’s exactly why a stock that just fell by double digits on the screen is barely down in our portfolio.
A selloff like this one, driven partly by a temporary, fixable problem and partly by the market simply misreading a piece of news, is precisely when a patient investor gets to add at a better price. Not everyone managed to fill their full position when we first recommended this name, and days like yesterday are how you get that second chance, at a lower price.
Below, for paid subscribers, I name both companies, walk through exactly what happened to each and why I think the selloff was overdone, and give you my current buy levels. If you've been on the fence, this might be a good moment to come inside.