I Called My Wife an Idiot When She Told Me to Sell BABA at $220

Investing in the stock market can be challenging and, at times, humbling. Today, we're going to dive into a story about one investor's costly mistake and use it as a learning opportunity for all of us. This investor ignored his wife's advice to sell Alibaba stock at $220, which resulted in a significant loss. We'll break down what went wrong and share valuable lessons to help you avoid making the same mistakes.

Link to YouTube video : https://youtu.be/ts3-Jvl5Htg

The $100,000 Error

The intriguing part of this story is that if the investor had followed a set of proven rules, he could have avoided losing over $100,000 and instead made a significant profit.

In this blog post, we'll look into the misguided decisions that led to these losses and reveal three dangerous mistakes that tanked his portfolio.

Afterward, we'll discuss three simple strategies that could have turned his losses into gains.

Misguided Decisions

So, what went wrong? This investor made several critical mistakes, including focusing on the wrong stocks and not cutting his losses short. Let's break these down in more detail.

Highlighting the Errors

Great investors are not constantly trading; they know when to be in the market. The first problem this investor had was focusing on poor-quality growth stocks. If you want to pick the best growth stocks, here are three main criteria to consider:

1. Super Earnings Per Share (EPS) Growth: Look for stocks with quarterly year-over-year growth of about 50% in the last two quarters or 30% in the last three quarters.

2. Revenue Growth: Aim for an average revenue growth of about 15% year-over-year in the last four quarters.

3. Return on Equity: The stock should have a return on equity of 15% and above.

Another mistake to highlight is the failure to cut losses short. When trading, it’s essential to cut your losses and avoid holding onto stocks that continue to drop in value. Great investors often have smaller gains but also smaller losses, leading to overall profitability

Analyzing the Portfolio

Let's take a closer look at the investor’s portfolio and the mistakes that were made. This investor could have avoided losses by making informed decisions, such as not holding onto poor-performing stocks like Alibaba and instead focusing on top-performing alternatives.

For instance:

1. Alibaba: This investor bought Alibaba at $220, and it is now at $107.

2. Disney: Bought at $86, now at $95, but other entertainment stocks outperformed Disney.

3. NIO and PLTR: Showing significant losses due to poor stock choices.

How to Fix the Portfolio

Now, let’s discuss how this investor could have turned things around.

The key is to select the best stocks in each industry. Here are some alternatives:

1. Alibaba: Replaced with CHWY, MELI, or CPNG, which had significantly higher returns.

2. Disney: Alternatives like CMK and Netflix outperformed Disney.

3. EGLXF: A poor choice replaced with better-performing stocks in the same industry.

By choosing the top 1% of stocks in each sector, the investor could have vastly improved his portfolio performance.

Final Thoughts

In conclusion, this story serves as a valuable lesson for all investors. Always focus on high-quality growth stocks, cut your losses short, and choose the best-performing stocks in each sector. If you want more tips and precise stock alerts, consider signing up for our newsletter.

I hope you learned something new from this post.

May the markets be with you!