Have you lost money investing? Read this

Investing is like batting in baseball. Just because you’re wrong with one pitch doesn’t mean you can’t hit a home run later.

Last week, I wrote about how I made a mistake rushing to invest in Fastly. No, I haven’t changed my mind about that. But I do think that’s part of this game called investing, or betting.

You see, you have to be ok with losing in order to win here. Investing in stocks isn’t like taking a test or going to school. You won’t get 100%. That’s the wrong paradigm. It’s different than that.

It’s more like playing baseball.

In that game, batters approach home plate and get into the batters box and they get ready to face off with the pitcher. And the fact is, when they do, they will lose. They will lose more than they win. Even the best batters hit 30% of the time. Babe Ruth did a little better than that. Great hitters have more losses than wins. That’s the nature of batting in baseball.

And when a batter is losing more than winning they have to constantly reframe their minds in order to actually get hits when they’re at bat. They can’t let the last strike or foul ball or strike out or missed swing faze them. They must clear their mind enough to focus on the present count, pitch—moment. And they know that this is new and what matters most. What happened before can’t be changed. What will happen can’t be predicted. The best thing a batter can do is sit and practice presence. Because, right now is all that matters.

If you’re an investor, you’re like that batter.

You will have losses. You will make mistakes. You will get flustered. You will fail. But the sooner you are able to calm yourself, release the loss, the past, the future and engage fully in the present, the better you will be able to do in this game of investing.

Right now, I’ve decided to sit in my bets and be patient. I’m waiting for the right pitch.

I’ve had a loss. But all isn’t lost. And, over time, I think I’ll hit a grand slam, maybe two.

I believe you will, too.

Happy betting,
John


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What I learned from making a mistake in my investing this week

Recently I bought Fastly stock (symbol FSLY), and that wasn’t the problem. This was. 

I bought at the top and held onto it even when I felt like I should have gotten out and waited. 

Investing isn’t all about feelings. But we should follow our gut. Let me explain. 

My feeling wasn’t that I was afraid to lose money. I’ve taken positions that I felt fine or less un-fine when the stock price dropped, and I was “losing” money. I wrote a whole post about it here. That doesn’t bother me that much because I got the stock at a better price, or I was more confident that it would continue to go up. 

But when I bought Fastly, I didn’t. The same feeling wasn’t there. No, it didn’t feel right. 

The price was super high, shooting up all year. It was up over 500%. And it wasn’t clear if it would be able to keep up that pace. And I felt unsure about it.

But I got greedy. You know that feeling of I-got-to-get-in-too-so-I-don’t-miss-out kind of feelings? Yeah, FOMO. That’s what happened to me this week. So I jumped in, undisciplined and greedily. 

Now, I’m not saying I regret buying it totally and utterly. No. I regret buying it then, this past Tuesday for 133.50. Yes, I do. I bought way—too—high. 

There are times to buy a stock when it’s “high,” but this was not one of them, and my gut was telling me so. But I didn’t listen. 

Following your gut in the markets can be tricky. It’s hard to figure out. 

It takes time. 

For instance, when something inside of you that’s primal tells you (or screams at you) to sell a stock right after it drops because we humans hate to lose money, that’s not your gut. That’s different. That’s our lizard brain at work. And that type of thinking has a name. 

It’s called loss aversion. 

That means we feel the loss of money, or, really, anything, more than when we gain. It’s strange, but true. So when you lose $100, that will make you feel more pain than the happiness you would feel if you gained an equal amount. 

Loss aversion is not the gut.

The gut works with reason and experience. It synthesizes information in your subconscious, and it murmurs a quiet little voice that whispers hushed thoughts that help guide you. It lets you intuit things like a certain sector might catch fire (in a good way) or when a stock might be the right pick or, in this case, a stock price was too high to enter, and it’s better to wait. 

I’m not saying that Fastly isn’t a good investment. I think it is. I don’t believe that the stock price will go to zero and think the company will continue to grow. 

But I didn’t listen to that little voice inside of me this time. And now I must live with the consequences. The stock dropped 30+% since I bought it.

But it’s not the end. 

That’s what I love about investing in the market. A mistake needn’t kill you. If you learn from it, you can recover. 

You can even thrive. 

Learning is key.


Disclosure: None of this is investment advice or the like. It’s just one investor sharing his learnings and stories. Consult a professional advisor if you want help in investing.


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Why I think Fiverr’s stock will continue to outperform

When I bought the stock, it was not cheap. It had already had a significant run-up close to 500% or more since March. So yeah, I was super late to the party. But I don’t think this party is ending anytime soon. 

I think that Fiverr has a long way to run. 

In other words, this party is just getting started. 

I’m invested in Fiverr

I bought the stock when the price was in the $140s, going long in early October, and the position was a pretty decent size for me. It has had a good ride up so far.  And I just recently added to the position yesterday. 

As of this morning, it’s up close to 18 to 20%. That’s solid for less than a month of holding a stock. 

The prospects of how the stock will perform are looking very bright for Fiverr and anyone who holds a position.

Here’s why I think that.

Macro forces are favorable for Fiverr

We are increasingly in a digital world. People use websites more and more, not just to market their websites but to transact on them, communicate with their customers, create communities, etc. requiring a developer or designer or copywriter.

In the US alone, there are over 30 million small businesses. That’s not counting any of the other countries in the world. And that’s not including the larger businesses.

Also, people are starting businesses, amid the pandemic and the recession it caused, at a faster rate in more than a decade. 

And most of those businesses need someone to help them set up a website or a digital presence. And they won’t want to pay a company like mine or an agency to get that done for them—no. They will go to a small gig worker, a freelancer. 

They’ll go to Fiverr, or someplace like it. 

Fiverr’s a marketplace, which is a moat

They provide a marketplace for individuals and business owners to find freelancers to help them with their website or creative-services-needs that won’t break the bank. And that’s not the only thing that sets Fiverr apart.

Their prices are often otherworldly low. You can find a developer who is willing to put together a package that would build you a website for near to nothing, some for less than $100. It sounds absurd, but it’s true. There are all kinds of options for a scrappy small business owner.

Fiverr is a marketplace that isn’t just for the US, no. It’s for the world. Anyone who starts a business or has an established one can find a person to build an e-commerce website, produce a video, or design designs, create copywriting, etc.

And freelancers can find customers on Fiverr’s platform and work as they wish. They log into Fiverr from anywhere in the world, and they can be on their couch in their underwear or in a business suit at a high-rise office. They can be in a remote country or a first-world nation. It doesn’t matter. 

Fiverr also removes friction, which makes it a bigger moat

Fiverr is a two-way marketplace that connects freelancers with individuals and businesses, focusing on creating frictionless transactions. And that’s a magical place to be. This marketplace connects two different parties around a synergistic area. For Fiverr, that’s creative work. It essentially connects buyers with sellers and vice versa so they can do business and create something together. Fiverr makes it as easy as possible by removing friction on both sides.

Building a two-way marketplace is hard enough, but making it super frictionless is another. And it can make all of the difference.  

Look at Zoom. Zoom entered a space where huge incumbent companies were playing. You know, like Google and Microsoft. And many people and investors thought Zoom was crazy and didn’t think it could succeed. But they did. What set them apart was this. They were obsessed with making video conferencing easy to use. They focused on the user experience above all else. 

And because of that laser focus on the customer experience, they won. 

That’s what Fiverr has and is continuing to do. 

That’s why I believe they will continue to win. 

I’m betting on it. 


Disclosure: None of this is investment advice or the like. It’s just one investor sharing his learnings and stories. Consult a professional advisor if you want help in investing.


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When I made $100,000 in one trade

Investing isn’t just about betting. It’s about how big of a bet you make.

Size, here, does matter.

Investing $100 versus $100,000 makes a huge difference in the outcome. The former will make you some money, even if it’s a huge winner, or, by betting the latter, it can change your lifestyle.

I traded futures

One day I decided to short the market, which means I bet the market would go down. It was during a time when I was trading—a lot. I was making intraday positions and had some success in it. (It’s not how I approach the market anymore, really; that’s for another post.)

I traded the futures market. There are all kinds that you can trade. My favorite was the S&P 500 E-Mini (symbol ES). It tracks the S&P 500 and is traded almost 24 hours a day and is very liquid, meaning you can easily buy and sell your position. It’s also a simple way to bet on the market going up, or down.

Before I shorted on that particular day, I had been going long, thinking that the market would continue to go up. But I kept on losing money. After several attempts, I thought maybe the market wants to go down since, at that point, it was at or close to an all time high. So, instead of going long, I took a small short position.

Taking a winning position

The market slumped. And my position was winning. Then, I added to it. And it kept on winning. So I shorted more, adding to my growing short position in ES. Then the market fall accelerated in the last hour of regular trading as panic ensued. And I was shocked by how much money my trade made. By the time I closed my trade, after regular trading hours, I had made well over $100,000. That was in one day.

For me, it was incredible.

To make that, I had to take a large position. By the end of the day I had accumulated over $1MM worth of a short position in ES.

It was scary.

Winning can be scary

No one is saying that taking that big of a position isn’t frightening. I wanted to put on some man-diapers because I almost crapped my pants at least a few times that day—and, I was making money. It might sound so strange to hear that I was terrified when I was winning. But all I could think about was, What if I was on the other side of that trade. That haunted me even as I closed my position and took home my winnings.

And there’s a reason for that fear. It’s this: Taking large positions is terrifying, no matter what side you’re on. That’s because of the risk you are assuming when you take a larger position.

That’s why it’s important to gain conviction.

You need conviction

That means you get a sense that a stock or market or whatever will take a certain direction, and you have a strong sense you are right. You won’t be certain because that doesn’t exist in life; it certainly doesn’t in investing. But, you can form a strong belief. One of the best ways to gain that is by reading and researching. You’ve read about the market, weighed the various voices and opinions, including your own, and you formulate a conclusion. That is conviction. It’s a process. It can be done quickly, or it can take years. But to make your best bets, I think a conviction must be formed.

When I took that short position it was because I had been in the market and could sense that I wasn’t going to win going long. And then I started to see that I needed to do something different. Reading Market Wizards (affiliate), a book about trading helped me do that because I noticed that many of the traders I read about in the book would react to losing and quickly pivoted and go the opposite way. So I did the same.

One last thing about forming convictions, it takes time to hone. Conviction isn’t the same as intuition. You know, that’s the “feeling” someone gets when they think something is going to happen. It’s almost like voodoo magic. I’m not going to downplay intuition. It is a thing that works. But, I don’t think you can consistently win with just that. It plays a part of conviction but isn’t all of it. “Feelings” and facts are needed. Intuition is a feeling you might be right. A conviction takes that feeling and confirms it with research and reading and reflection—or they contradict that intuition. People who have an intuitive sense that is reliable are the ones who have been scouring the research and news and have had their pulse in the market and know their sector well. They are practicing the gathering of knowledge and learning. They even unlearn. If you practice all of that, you will train your senses to sniff out the best convictions.

Then you bet.

I accumulated

And you don’t need to take a big position at first. It can be small. Once you gain more confidence, you can grow it.

Your position size can be grown. It can be accumulated. That means you can take a smaller position at first, then add to it over time as you gather confidence. So you don’t need to plunge into a stock or a futures position, no. You can just dip a foot in, then add your leg, and once you see it’s right, dive into the pool.

That’s what I did on that day I shorted.

And this isn’t for everyone. It is risky.

Learn how you best risk

You need to account for risks.

One key variable you need to consider when you do that is yourself. What type of risks do you do better in? Are you a day-trader or are you more long-term? Should you trade in bonds or stocks or futures? Not everyone thrives under every situation where there is financial risk.

For me, I didn’t like trading futures as much as I liked investing more long term in stocks. That’s why I stopped trading and started buying tech stocks and holding them. It suited me better. Taking larger intraday positions was too terrifying for me. So I switched to buying positions into companies that I believe in. I found that I could do that more effectively and could take larger positions there with less fear.

Find what best fits you, and you’ll see that sizing up may be more natural than you realized.

But whatever you do, you need to know that you can lose money. You probably will. No one always wins. Not. Even. Buffett. Yes, Warren Buffett loses; check out his losses on the airlines.

Reap the rewards

Look, there are no rewards without risk.

Not everyone should be taking huge risks. Some people can make millions in a day. Many won’t.

To get greater rewards, you need to know yourself better.

The most important thing is that you are growing in your risk-taking and learning to become a better investor.

If you do that, you can’t help but win.

And you’ll be rewarded.


Disclosure: None of this is investment advice or the like. It’s just one investor sharing his learnings and stories. Consult a professional advisor if you want help in investing.


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An unconventional tech bet: Signet Jewelers Ltd.

Have you considered diamonds as a tech bet on stocks? 

I hadn’t until I read a post about Signet Jewelers (symbol SIG) in the jewelry space, that deals heavily in engagement rings. 

Now that might seem odd for a blog that focuses on technology stocks to talk about something so physical like jewelry and precious stones. But it’s not, really.

The pandemic crushed SIG’s stock price because it was a physical store retailer. You know, in malls and such. Remember those? But that’s not what makes this interesting or a tech investment. No, it’s this.

Signet’s pivot to e-commerce

They pivoted to an e-commerce store, and they’ve done it pretty well and quickly. And they’ve seen growth. 

They also own a lot of brand properties that you would recognize like Kay, Jerad, Zales and James Allen. They’re all national brands that most consumers would know, and that recognition doesn’t just fade away. They have staying power. And, yeah, those brands belong to SIG. And now it’s moving much of its transactions and sales online. 

Signet has some interesting tailwinds

And here’s the really interesting part: Online dating is on fire. That is directly related to SIG because they are in the love business. When people are going on their awkward first dates, even over Zoom, and, if something magical happens and they fall in love, that means magic will happen with SIG: They’ll get sales. 

They will sell jewelry and engagement rings by the stock-price-moving boatloads. 

I think people are dating more in these weird times because social distancing and isolating are causing us to realize that being in a relationship is a good thing. We aren’t designed to be alone. And being in all of that aloneness creates pent up demand for relationships, dating in particular. And the culmination of that is often marriage. 

And no matter what you’re opinion of diamonds is, people buy them when they’re in love and getting ready to get engaged. That’s the norm—even the expectation. 

That’s where SIG will do well. Inevitably some of those lovers will end up in one of Signet’s online stores and buy a rock to display their undying love in an expensive little (or not so little) stone. 

Customer behavior is changing

And buying something worth thousands of dollars online sounds absurd. But it isn’t. The behavioral trend is certainly in its favor. Just the other day, I bought a car, sight unseen. That’s right. I didn’t even test drive the vehicle before I wired over a lot of money to the dealer. Don’t worry; it worked out, and the car’s great. And consumers are doing this more and more. That’s why companies that sell cars exclusively online, like Carvana and Vroom, exist. So if people are willing to buy a car over the internet for thousands of dollars, it’s not a far step to get a diamond online either. 

And that’s where brand recognition shines. People will be far more willing to shop from brands they know. Covid is likely making that behavior even stronger since consumers are forgoing in-store buying. For consumers to buy big-ticket items online, it helps to have stronger branding, returns policies, and a greater ability to imbue trust. Signet with their brands does that. That branding is gold diamonds for a company that has it.

And that can flow down to investors who hold SIG stock. 

Signet’s competition

There are other brands that SIG doesn’t own but are recognizable like Blue Nile. There’s competition. But that doesn’t mean both of them can’t exist in the same universe and still win. They can. They can both make money and still exist fat and happy.

The jewelry business has always been fractured. There are thousands of mom and pop stores. Then you have the larger retailers and the national brands. And many have been doing just fine even with so many other jewelers. 

Closing thoughts

I don’t hold any shares of SIG at the moment, but I am watching it. It’s interesting. It’s been rising since it bottomed around $5 in March, while in the throes of pandemic fears. Before that, in November 2015, the price of the stock maxed out around $150. Yesterday it was hovering around $20, almost quadrupling since March. As long as it survives and truly makes the e-commerce work, there is a lot of upside for this stock.  

Of course, there’s risk. All bets are risky one way or another.

The point is to lower the amount of risk as much as possible by finding companies that can grow and dominate their markets and have favorable market conditions. And Signet certainly seems to have all of that going for it. 

And, maybe, if you invest well and you’re one of those lovebirds who bought an engagement ring, you might be able to get your money back on your engagement ring by investing in SIG. 

Don’t take my word for it though. Do your own research and talk to a professional advisor. 

Happy betting. 

John 

Holding cash makes you poorer; instead, invest

Cash is great, but it’s a terrible investment. Cash is just a tool. It helps you buy stuff, feed your kids, keep sheltered—you know, live. But, cash needn’t just be spent; it can be invested.

Doing that grows your wealth. That’s the secret rich people know.

See, holding cash is a wealth-killer. It doesn’t just keep you from growing your wealth; you’ll keep losing it. That’s right: Holding cash makes you poorer. I know, this may sound completely absurd, but, I assure you, it’s true. It’s as true as the sky being blue and the water being wet.

How inflation works against you

And that truth about cash losing value has a name: It’s called inflation. That’s when things and services that we buy get more expensive over time. For instance, the real estate market is getting more expensive, so are rents, groceries, even our Netflix subscription. Prices go up. That’s inflation at work.

And if prices are inflating, and you’re in cash, that means your cash’s inherent value is going down. That’s because it will take more cash to buy the things you were buying as the prices go up. We’ve all heard about how older people say, “in my day” a candy bar was a nickel and buying a house was $30,000. Now, it’s not that; it’s much more expensive. Our dollars don’t go nearly as far as they used to. That’s inflation.

To beat inflation, invest

So this is where rich-people-thinking shines: They invest.

There are all types of places to invest your cash, like bonds, real estate, starting a small business, etc. But, for this post, I’m going to focus on stocks. That’s the stock market, where anyone with some cash and a brokerage account can buy pieces in companies like Apple, Google, Netflix, etc.

Since money loses its value over time, you need to find ways to increase your money’s value. And investing in stocks is one of the best ways to do that.

You see, companies, or at least good ones, grow. They innovate, make new products, gain more customers, sell advertising, make shows we binge because the pandemic is driving us nuts. And all of that generates more value. And that value generation occurs faster than inflation. For tech stocks, it’s often much much faster, like blow-your-freakin-underwear-off fast.

The power of investing in technology stocks

In the stock market, tech companies in general have been giving investors returns that would usually only be available to venture capitalists. What I mean is that the stock market historically has given investors a 10% increase on their invested money’s value. But, some tech stocks in the past decade see hundreds or thousands of percentage growth. For example, people who invested in Amazon’s IPO and held on to 2020 would have seen a 120,000% increase in their investment. Yeah, let that sink in.

So if you’re experiencing that type of growth in a stock you’ve invested in, you will beat inflation easily. Here are some simple numbers to chew on.

Inflation often grows at 2-3% a year, so that means your money is going down that much yearly if it’s in cash. That means $100 becomes $99 or $98 rotting away in your bank account or under your mattress, after inflation has its way with it after a year. But if you took that $100 and put it into a tech stock, let’s say Netflix and the stock price goes up 100% in two years, which has happened, your $100 will be $200. Now I haven’t adjusted for inflation. But the point is your cash, when invested well, can grow incredibly despite inflation.

Closing thoughts

Yes, stocks can go down. And, they do. There have been times when I’ve lost money on a stock. But, really, if you hold on to those stocks, most of them go back up. See, just because a stock plummets doesn’t mean you need to sell it. If you hold on and bear the pain of “losing” money and stay patient, most stocks rise back up and will increase even higher than where you initially invested.

Time is really the secret sauce for investing. When an investor shows patience, they will exceed their expectations of how much they can grow their cash.

And if you do that, you won’t just beat inflation.

You’ll be rich.

One of the greatest secrets to making money in the stock market

The hardest thing about investing in stocks is letting go of your money. Let me explain.

When you invest your money into the market, you can’t control how the stock price will behave, and often it will go down. And the temptation is to sell when it does that. And that will mean you will “realize” your loss, which means the money you were losing before you sold your stock, called a “paper loss,” will become a real one if you sell your stock when it goes down from the price you bought it. So you will walk away with less money than you started with. No one wants that.

But it has happened to everyone; I’ve done it; even the pros have, too. But that needn’t happen to you. And it’s all about your approach.

If you approached buying stocks differently, you’d avoid realizing your losses and will even make gains. You can even get rich. And that means you need to understand that once you invest your money into a stock, you need to cease thinking about it as money to succeed.

You see, investing in stocks is about thinking less about your money and focusing more on your investments. Because to make more money in the stock market you can’t think about money. That will just make you lose it faster.

When you focus on your money when it’s invested in the market, especially in tech stocks, there’s volatility. A lot of it…boat loads of it. Those are the ups and downs a stock price will go through on any given day. You know, the ones that scare the crap out of you, that make you jump ship and sell before you ever intended to, the ones that make you feel like you’re going to lose all of your money if you keep holding on to that stock. Yeah, those.

Holding on when you get into a stock is especially hard when you first buy a stock and then it goes down, like, immediately after you buy-in. It feels awful. I know. I’ve been there—many times.

I bought Nvidia over a year ago, and it dropped by 50% or more over a month or two. So, at that point, I was thousands of dollars down. And believe me, I wanted to sell and realize my paper loses. It felt like everything inside of me was burning down. But I held on. I didn’t sell.

Instead, I waited.

If you buy a good or great company’s stock and it goes down, they will often go back up and continue to grow. That’s what great companies, especially the ones that are market leaders, which Nvidia was and is, do. Waiting and holding your stock position will help you avoid a loss even when you’re thousands of dollars down. And more importantly, eventually, you’ll gain.

To do that, you have to let go of your money. You need to stop thinking about your money as it is. Yes, it’s hard to see the ten thousand dollars you initially invested become five thousand when a stock price drops. And, yes, it does feel like someone just reached into your pocket and robbed you in broad daylight, while smiling at you. But, if you can short-circuit your brain and stop thinking about your money as money, you’ll begin to see something else. Something better.

You’ll start envisioning yourself as an owner. Because, really, that’s what buying a stock means. You own a small piece of a company. When I bought Nvidia’s stock, I owned a small piece of the world’s best chip designer. And sure, the stock fell out of favor right after I bought it. But when I wasn’t focusing on my money, and the imaginary guy’s hand in my pocket, I was able to focus on my investment. And I remembered why I bought it in the first place, which made it easier to hold on to the stock and wait. And I could see that the company was going to be ok and was able to remember that it was the market leader and the best at creating AI chips and would continue to innovate. Doing that helped me stop thinking about my 50% drop and realize I owned a piece of a world-class company.

After several months, Nvidia fully recovered to the original price I bought it at. Then it continued to go up, as did my net worth. I did sell it, unfortunately. That’s because it dipped during the covid scare earlier this year, which is when I sold it, to my chagrin. It was for a gain, but for far less than I would have if I held on. If I would have held on, instead of making a little bit of money, I could have more than doubled my money.

That’s the thing about making money in the market. When you think less about your money, the more of it you often make.

Now, I’m not saying that every stock will recover or will be a winner. And, I’m not saying that everyone can get rich investing. I am saying that you need to do your homework and need to invest in the best companies you can find. And if you do, and hold on, your chances of growing your wealth is much greater, than if you don’t.

You see, you don’t become rich by thinking about money. No. You do it by thinking like an owner.

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Why I decided to buy Fiverr stock and not Upwork

On the surface, Fiverr and Upwork almost seem the same. But, they’re not.

Both help customers find freelancers to get a website designed or built or a video or some other creative work created. 

But if you dig deeper, that’s when you see the difference. And they’re meaningful. 

The differences between Upwork and Fiverr

Upwork helps you find talent, but there’s more friction when you use the site. To find what you’re looking for, first, you need to sign up for Upwork and answer a set of questions before getting anywhere. You can’t see anything helpful or the type of person you’re looking for until you go through their process. That’s annoying. And making people annoyed is not a great way to win customers. 

Fiver doesn’t do that at all. On the top of the home screen, there’s a search field, and anyone can type in they type of work they want help in, say CSS, and instantly you’re provided a list of people, with reviews and ratings, who’ve CSS’d for others, from which you can choose. It’s easy. And it’s instant. There’s little friction. 

And that’s critical. It’s the difference, really. Fiverr makes it easy for their customers to do what they came to do, which is find help. Removing friction is one of the most important things a tech company can do. And when they do, they unlock value that can scale incredibly fast. That’s one reason Fiverr’s stock and revenue are shooting up like a firework on Independence Day. Upwork’s revenue is up 19% in the second quarter year over year versus Fiverr’s 82% growth. That’s a meaningful difference.

The business model is also very different. Upwork has a subscription model with a classified labor site. Then they will offer bundled solutions. But Fiverr helps the customer find a freelancer as quickly as possible. 

And their monetization model is meaningfully divergent from Upwork’s, too. Fiverr just takes a percentage of the fee that is paid for the project. There’s no need for the customer to subscribe to their service or platform. No, they just find someone and start the work, and Fiverr’s fee is baked into the process, which doesn’t require the customer or the freelancer to do anything else other than to get to work and get things done.  

The power of the two-way marketplace

Fiverr and Upwork are also two-way marketplaces that source affordable talent globally and connect them with willing and hungry clients. But Fiverr is running away with the show. 

Year to date, their stock is now up over 500%. That’s a lot of zeros of performance for just twelve months. If you invested $10,000 in Fiverr stock a year ago, it would be worth around $60,000 today. 

And yes, that’s the stock I just bought yesterday, the one that’s already up 5X. 

You might be thinking, “John, buddy, that stock is way too expensive and it’s already had its run.” 

There is credence in what you say, especially if the stock drops drastically in the next several months, which it probably will. But the question is, When? We don’t know when it will drop, and how far it will continue to rise before it does. Instead, I think we should be looking at the fundamentals of this company and why if it has the power to sustain its growth. 

The industry is huge and growing

The fact is the freelance market these companies are working in is huge. Some say it’s $100 billion. But I think it’s bigger and will continue to grow. Upwork and Fiverr are opening up a larger market for freelancers. And once companies and individuals get more and more accustomed to this way of working, they will only use it more and allocate their resources accordingly. It will change the way business is conducted. So that $100 billion pie will become something much larger. 

Also, I know the creative industry. I have a creative agency. And, from my experience, businesses will always need talented people who are willing to help them with their creative needs. And once they see that they can get quality work on Fiverr, or Upwork, for a cheaper rate than domestic talent offers (much of the people who provide the work on those platforms are international), they won’t look back. In this video, a Youtuber shows how he found a couple of people to build him websites, one for $100, the other for $30. And he said that both of them were pretty good. Yeah, that’s right, thirty bucks, for a pretty good website. I’ve been in creative services for a decade now, and I have never, even in my most cash desperate days, ever thought about charging that little for a website. $30 is what I would spend on a business lunch. But that shows the power of Fiverr. It offers that type of value, where you can get a solid website for the same price you would spend for an overpriced sandwich. Since that’s the case, why wouldn’t more people use Fiverr? They’d be crazy not to. And if you can find that talent easily and reliably, it will only grow as a source for creative work. 

And not just that, two-way markets are incredibly hard to create. That’s when you connect the supply side with the demand. Airbnb, Amazon, Uber are all two-way marketplaces. Airbnb connects hosts to those who need hosting, Amazon sellers to buyers, Uber passengers with drivers. And they are huge and seemingly indomitable entities because they built a marketplace and reached an incredible scale so it’s hard for anyone else to really threaten them. And building them isn’t easy, and once they are built, they are very difficult to dislodge. Fiverr is one of those two-way markets. 

Now, since the total addressable market is enormous, $100 billion plus and growing, it allows for more than one player to grow comfortably. So Upwork and Fiverr can both exist as Uber and Lyft do. Duopolies can live fat and happy lives without killing each other. However, I do think that Fiverr can become the more dominant party here. They have the momentum and all of the right pieces going for them. 

Closing thoughts on Fiverr and Upwork

Yesterday, I actually invested in both Upwork and Fiverr. Then I started digging further into the differences. My company has used Upwork. And when I invested, I thought, “What’s the big difference?” Upwork actually seems to be the cheaper, in terms of stock price, than Fiverr. Upwork hasn’t had a 5X uptick in its stock price. But then I realized that Upwork didn’t have a huge revenue boost or the same trajectory or momentum either. So I sold out of my positions of Upwork. 

That doesn’t mean that Upwork can’t change and improve its customer experience model and design. But, for the time being, they haven’t. And the price of their stock represents that difference.

And that means the difference between me buying and holding one and selling the other. 

That’s why I’m long Fiverr. 

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Berkshire Investing in Snowflake Is Revolutionary

Berkshire Hathaway’s investment and Snowflake (symbol SNOW) is a wake-up call to all investors, for both value and growth.

The stake it took was a whopping $730 million. And yes, it made a 100% gain in the first day of trading, making their investment worth $1.6 billion before Warren Buffett, the CEO of Berkshire, even cracked open his second Coke Classic of the day. And it’s easy to get all wrapped up in that, the gain, not the Coke, and think, “Golly, that Buffett is amazing and rich and amazingly rich.”

But that would mean we just see the glitz and glitter; we’re missing the big picture because there was a seismic shift that happened when Berkshire invested in Snowflake.

The Real Meaning Behind Investing in Snowflake

They shifted to growth investing. I’m not saying that Berkshire believes that value investing is dead or that they won’t be looking for those types of opportunities ever again. But they are legitimizing growth investing. If you look beyond the noise of Snowflake’s doubling and this and that return, you can see the signal that Berkshire is sending is revolutionary. Remember, to learn from any investor, don’t listen to what they say but what they do. And what Berkshire did was invest in an IPO that was already expensive and carries all of the uncertainties of a tech IPO, yet, they still invested. Yeah, it’s big.

Sure, Berkshire isn’t unfamiliar with investing in tech. Two of their largest holdings are in Apple and Amazon, longtime darlings of the market. And as much as Apple could be considered a value play, Amazon certainly was not and still isn’t. It has always been expensive. But investing in Snowflake is another step toward a different investing framework that is evolving in Berkshire. And here are some of my thoughts about it.

It’s validating an investing strategy that has long been perceived as being at odds with value investing. I don’t think Buffett thought that. But it was clear in his previous investments in consumer goods and airlines, etc. he was investing like a classic value investor. And as the world changed and their performance shrunk and dwindled while the technology sector seemed to be swallowing the universe with tremendous growth year after year, it doesn’t take a genius to see that the world has changed. Now we see the greatest value investor act in a way that is contrary to that investment philosophy.

Now we shouldn’t just pay attention to the macro steps but also the micro ones. By doing that, we can learn from why they invested in Snowflake and made this change.

What We Learn From Berkshire Investing in Snowflake

They weren’t spraying and praying. No, Berkshire knew the power of Snowflake. They were informed and intentional. As an earlier customer of Snowflake, Geico used it to store and analyze their data. They knew Snowflake’s monetization model since they likely pay them a lot of money. And they probably did it happily since they found their services invaluable. That insight and experience caused Geico’s CEO to lead one of the earlier rounds of investing in Snowflake, pre-IPO. And all of that information was almost certainly shared with Berkshire and Buffett. So they had deep, intimate knowledge of what Snowflake does and what it could do in the future.

Berkshire focused on winners. Geico started using Snowflake, presumably because their service and platform was better than other providers. They saw the edge. Snowflake had set themselves apart from their competitors in their offering of better technology and services. Berkshire had an early look into Snowflake at scale, since Geico is a large company with massive data. And if Snowflake helped Geico make more informed and insightful decisions through Snowflake’s product, that’s an incredible advantage as an investor. They saw how powerful the product is and how much it can bring to any industry, company, customer. And it looks like Berkshire believes Snowflake can be a dominant force in their market.

I had a similar experience at a much smaller scale. My company used Shopify and Twilio to build software solutions for our clients. And my business partner kept on talking about how great these platforms were. And once I realized that they were publicly traded companies, I invested. And they, especially Shopify, have performed incredibly well for me. That’s what experiential information with first-hand experiences as a customer, like Geico had, can do. It gives a powerful insight into a company. It helps you see how valuable it really is.

The reason that Snowflake is different from Amazon and Apple is that the latter two already dominate their respective industries. Who’s better and bigger than they? No one. The likelihood they will get knocked off their lead is very unlikely, especially in the near future. So they are relatively safe investments. It’s a more of a value play. But Snowflake isn’t that dominant. They are not the biggest player in their industry. So there is inherent uncertainty. Yet, Berkshire still invested.

Why This Matters to All Investors

Why does this matter to us, smaller investors? It should make us re-think. If you are a value investor, it should make you reconsider your investment strategy. When one of the greatest value investors starts to use a growth methodology in force, all value investors should reconsider their core investing tenants. And it’s true; we don’t know if he was the one that decided to invest in Snowflake. It could have been one of his heirs to the Berkshire throne.

And I don’t know if Buffett or Berkshire is moving away from value investing. But the company is certainly moving toward growth investing. And that should make every investor wonder why.

And one clear reason is that those who have invested with a growth strategy have performed incredibly well. Not all, of course. But many. Anyone who invested in Amazon, Netflix, and Google early vastly outperformed the market. It seems that Berkshire doesn’t want to lose out on future companies like those. For instance, they had the chance to invest in Google when it IPO’d but turn it down because they thought it was too expensive at $24 billion. Now Google makes that in yearly revenue. And Berkshire doesn’t want to make that mistake again.

Also, for growth investors, this shift is good news. It means there will be more capital, more eyeballs, more people rushing to get into growth companies. That will buoy the entire stock market, especially for technology-based, high growth companies with an edge, playing in a large market, like Snowflake. That means prices for these stocks will likely go up faster and higher with greater multiples than before. We already see that. Snowflake is a perfect example, by rising 100% on day one of trading. And it’s continuing to rise, and there’s no telling when it’s going to stop. It probably won’t for a very long time.

Of course, not every technology stock wins. Not every platform grows and dominates. There are losers. Look at Quibi. So every investor must be careful, shrewd, diligent. We’ve all got to do our homework. And really, I don’t know if every company will have crazy high multiples and that investors will always tolerate super expensive investments. But for the foreseeable future, they will. They already are, even Berkshire.

And this, I believe, is only the beginning.

For a giant has awoken.


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Why I Sold My Uber and Lyft Stock at a Loss

People love to talk about buying winners because sharing your losers sucks. But every investor experiences them. I have with Uber and Lyft. And I’m going to talk about them now.  

Selling a stock can be just as hard as buying one, sometimes harder. That is especially true when we’re losing money. We can get weirdly attached to a stock and resistant to let it go, even if we know it’s the best decision. Doing that would mean we have to admit that we were wrong and other weird psychological phenomena that I won’t get into here. 

Taking a Loss in My Uber and Lyft Stock

Last week I sold my small positions in the ride-hailing companies, Uber and Lyft, at a loss. The latter was the larger position, which also lost more money. I think it was down over 50%, maybe closer to 75%. No matter how you look at it, those numbers are ugly. Uber was much smaller, maybe less than 5%, but still a loser. And the saving grace was that they were smaller positions, meaning I invested a relatively small amount of money in them, making them smaller losers. But, to me, they still felt big. Everyone hates losing money. At least I do.

Why I Sold Them

The reason I sold them wasn’t because I’m masochistic or have some fetish with losing money, no. Rather, I felt like these companies were losing because the industry was going to struggle for the foreseeable future. I’ve held on to losing stocks before. But many of them started to swing positive, eventually. Some took longer than others. But these never did. With the pandemic, I think it will be long before people start using drivers in mass. 

And regulation is coming down. California tried to create a law where these companies’ drivers will be treated as employees, which didn’t ultimately succeed since Uber and Lyft threatened to shut down their California operations. So the state relented, for now. But stricter laws that protect the drivers looks inevitable in California. And it could spread to other states. 

There is still value in Uber and Lyft. People will still use them. People will still drive for them. It is a solid business model. But the scalability, I believe, has lessened. Much of the growth has happened. And the investors who captured most of the most valuable upside were the private ones who bought in before the IPO.

Even With Headwinds, There Is Still Potential

There is still the delivery services, and it appears to be making great headway even with headwinds, replacing the revenue it had in rides, at least for Uber. And that sets up a great scenario where they will potentially have two great revenue sources after the pandemic. And there is a growth story there. 

And Lyft looks like they are offering the same service, but I don’t see how well they are doing in it and if they’ve been able to be as successful in pivoting as Uber has. And that lack of visibility may be the reason its stock has performed more poorly than Uber’s.

Also, Uber does have a great CEO, with Dara Khosrowshahi, who left Expedia to take over after Uber’s co-founder, Travis Kalanick, was ousted. But even the greatest CEO would have difficulty navigating a business where a business model dependent on travel is pitted against a pandemic that has kept people sheltered like hermits. Khosrowshahi is a great business leader, but even he has his limitations. 

In the long long run, I think they will do well. People need rides; they will need to go to the airport. City dwellers will want to live without cars and have the convenience of just tapping on their phone and getting picked up and schlepped to their destination on their steel chariot. That trend is not going away. It will only grow. But it will take time.

But I don’t think it’s worth waiting.

Closing Thoughts About Selling Tech Stocks

Sometimes it’s best to exit an investment, even at a loss, to get into ones that you believe will have a higher degree of success in the short and long term. The keyword in that sentence is “higher.” 

Money is a resource. And if we allocate it in the right vehicle, it can fly to far great heights than you ever imagined it could. That 50% loss can be recovered in less than a year, and you can start having a positive investment soon after that. That is especially true with technology stocks.

Because, often, staying in losing positions makes you lose the opportunity to find winners. See, just because you’re losing doesn’t mean you’ve lost. 

Sometimes, you just have to admit you’re wrong, push through the pain of selling at a loss, and find the winner that can give you bigger gains than you thought you could produce. 

Sometimes, to win, first you’ve got to lose. 


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