This Is The Worst Stock I Ever Bought
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- čas přidán 25. 07. 2024
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We’ve all had stocks in our history that turned out bad. Maybe they didn’t fit our goals or expectations. Maybe they were a good company but a stock that didn’t perform. Or maybe they were just a bad company that we didn’t know any better what to do. In today’s video I talk about what I consider the worst stock I ever bought, as well as the excess cash problem that big tech companies have, as well as Walmart and Chipotle’s stock splits and why I think they’re great.
00:00 Worst stock I ever bought
07:16 Big Tech’s Cash Problem
12:57 Walmart and Chipotle’s stock splits
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Hi Matt, great video! Thanks for taking the time to talk about share buybacks. I think a key thing to mention (and you may have done so but it blew past me), would be that share buybacks can destroy capital if done at the wrong time and for the wrong reasons. Some management teams have their compensation tied to share price in a warped incentive structure. This means that they will be incentivized to buyback shares when the prices are high, thus misallocating and burning capital over the long haul if the P/E is out of line with historical averages. Apple does this on a regular basis, along with Tesla and several others.
I touched on it briefly basically saying when prices are attractive then a buyback is a good use of capital. When shares are expensive it’s generally a poor use of capital
Thanks for the Video! 2021 was a crazy time!
It really was
Peloton, percentage wise. Thankfully i just bought two stocks when it dropped to $50ish. baba has been really bada though.
Good video. T-Mobile was the worst stock I bought....stayed flat for years until I finally got rid of it. Nowadays I find TSLA a dangerous stock. Also got burned by SNOW on a short put @200 in Feb....waiting for it to recover ...writing covered calls on it.
I bought Verizon multiple times over the years, similar situation until I finally realized it will never do anything lol. It could've easily been in the conversation for worst stock for me, but SNAP's actions are just bad
Do you have a video about how to check those numbers?
Which numbers?
@@mattderron sorry I should’ve been clearer
I meant operating expenses and income data
oh I see. You can go to Seeking Alpha and type in your stock then click the "Financials" tab.
I’m currently living my worst stock position, AEHR, silicon carbide testing for semi’s, EV’s, initially bought in around 30 thinking undervalued, now 11.50 (cost basis about 19). thankfully it’s about my 3rd smallest position, right now I’m holding more out of stubbornness. What’s your viewpoint on having a strict, no exceptions 4% or 6% stop loss on every stock purchase?
I don’t do it (stop loss) because my intention is that the positions are long term holdings and I believe in the business. Obviously if things change I’ll get out of a position but if I believe in the business it doesn’t matter if the price is down IMO.
However, if people are actively trading / swing trading based on technicals some mix of fundamentals and time - then yes I’d absolutely use stop losses
The moment you think you've made a mistake, you should probably take your losses and begin to move that to a winning position. If you're not super gung-ho to add to it, then that should definitely be a tell.
Stock split is also very helpful to make the stock attractive to the trade options community ❤
Very good point, I didn't think of that!
I took a flyer on Anchor Bank with $1800, bought in at something like $1.80 per share. I knew they were in trouble, but I thought someone wold step in and I would wind up with stock for a different bank. Nope, the executive team rode it right into the ground and its assets were given to another bank and the shareholders got nothing. You would think that people who work with money as a business would be smarter, but bankers have proven to be anything but wise.
Wow! That's a crazy story. In my experience working at a bank - it really depends. Some very smart people and others not so much lol
I bought nvidia at 970 and have been putting more in since it’s going down to bring it down to 950, should I keep putting in to make my average cost go down? It’s going back up eventually right, I’m kinda new I was doing a buy high sell higher kinda thing but now I see the bearish signs were there
It all depends on what your outlook is for NVDA. I added it at $897 and then again this week at $872, but I believe in the company long-term. A lot of folks on both sides of the argument on NVDA right now.
Ultimately it depends on what you think about their business, how long you plan to hold, etc.
I feel like I constantly have to point this out but if all you mean is the "the top" in terms of price - then sure. It's $4 shy of the top so far in April 2024. That may or may not matter depending on how long someone is planning to hold.
Actual value wise (not just price) NVDA is cheaper now than last year. I know this is not intuitive for some to understand due to the nature of their price movements.
@@mattderron I don’t understand hahahaha
Do you mean it’s cheaper as in NVDA has better value this year hence the price is good?
Yes - 1 year ago NVDA was trading at $275 and a Price to Operational Cash Flow of 120. So for every share you bought (costing you $275) you got roughly $2.30 per share of cash flow that the business was generating. That is a 0.8% cash flow yield.
Today, NVDA is trading at $870 and a Price to Operational Cash Flow of 76. So for every share you bought (costing you now $870) you're getting roughly $11.45 per share of cash flow that the business is generating. That is a 1.3% cash flow yield.
Basically you're getting more "cash flow for the money" from NVDA now than you were a year ago.
Now - does that mean NVDA is cheap? No, of course not. It trades based on growth prospects, not valuation. So it's only worth it if you believe that their growth story will keep exceeding expectations. I personally do, that's why I bought it. But many people don't, and that's ok too.
The point I was trying to make though is everybody keeps saying "you bought at the top" but that's only price, not value. NVDA is more attractive from a value standpoint today than it was at $275 / share.
Hopefully that makes sense, let me know if you have questions.
I bought nvidia at 146 lol
Matt, i bought snap for 7$ and didnt sell it when it went bananza, sold it for 10$ a few months ago :-(
I have a lot of these stories as well. Didn’t realize when it was time to take profits. Especially in 2021!
Im hoping Amazon and Alphabet start doing dividends haha... Since they have so much cash, it can't be used to grow that much faster.
Yup, I didn’t talk about it much in the video but it wouldn’t surprise me to see that similar to what META just did. All of a sudden they’ll be the most attractive “dividend growth” stocks out there lol
@@mattderron I don't have a lot of disposable income to throw into investing, but Amazon and alphabet stock (so outside of ETFs) make up about 4-5%.
I would love to really really slowly gain more shares via dividend while throwing what little investable cash I have into the ETFs or some other new positions.
My worst "best" blue chip Canadian telecom BCE... Safe. reliable, good dividend since 1881, in every single ETF, pension fund, my dad and sister work there, no brainer right? Now down 29% this past year. They recently cut 4800 jobs, but they increased the dividend. At this point, I'm keeping it til I die 😂
I love it 😂
Are capital intensive businesses like telecoms, airlines, railways, energy, real estate etc really good investments?
@@johnmonk3381 I think it depends on what your goals are and where you're at in your timeline. Not everyone will be measuring success based on total return over decades, right?
The worst stock I ever owned was a biotech stock called TCDA. I was just starting in my option trading journey and saw this stock had crazy high volatility. It had outperformed the market the past 2 years at that time, so I thought it was a good buy. I put like $3.5k in it, hoping things would go up. 2 weeks later, one of their biggest drugs wasn't approved ( I can't remember why), and the stock went from $15/share to $1 in 1 day, then the week after delisted. Hurtful but funny times, no more biotech for me hahaha
Whoa! That sucks I’m sorry that happened to you. Crazy story though!
Never bought single stocks. Did some Vanguard Target Date funds when I first started investing. Those were dumb and lost me a bunch of money (bought at the end of 21 and basically never recovered until I sold).
Yes! Target date funds, yuck. I mean - they're fine if someone really doesn't want to ever do anything with their investment for 30 years and is ok with a subpar return because of it.
I originally had my retirement accounts in them because - of course I didn't know any better - but quickly changed to a S&P 500 index fund after doing some digging and reading.
I distinctly remember thinking at the time - I'm 28, why do I need 10% bonds? Why would I care about volatility in a retirement account where I ideally won't touch the money for 30 years? It didn't make sense to me.
Also, anyone betting a third or so of their retirement on an international fund has severely underperformed over the last couple decades. Maybe that changes in the future, but again...hard to justify those.
@@mattderron basically all my sentiments. I'm pretty much 100% SP500 or similar at this point. Have had some pretty solid gains because of it.
We have all been there
I don’t remember the names but I did hold some stocks long, long ago that were delisted 😱
And the husband bought some shares of a gaming company he once worked for… it went to zero in about 5 years! 😂
lol oh no
Biggest issue with buybacks is how corporate compensation is structured. Their incentive is to raise the share price, which doesn't always translate to the best decision for employees, the business, the economy, etc.
Why give out raises, add jobs, innovate, etc. when we can just push a button and increase our bonus checks?
This is where it gets into personal perspectives, etc. People will say "just give the employees bonuses" because of the idea that it's "good" to pay your employees more. It definitely can be, but there are other consequences to that. Some employees performed well, others didn't. Are you rewarding them all? If not, how are you managing that? How many see the bonus as part of their compensation now and expect it going forward...these are realities that I lived through in my own corporate career. None of these issues are impossible to deal with obviously, but they need to be considered. And they are rarely talked about by some of the "just pay your employees more" crowd.
The other challenge is that yes, a lot of CEO compensation is tied to shareholder value, so it creates incentives for the management team to ensure the share price does well.
My personal preference is to do more things like Walmart and Chipotle did. Don't just pay the employees more, incentivize them to become shareholders. Then everyone is aligned to increasing shareholder value because it includes them as well.
@@mattderron Fair. Of course nothing should be blanket actioned like "pay all employees more". All companies have review processes in place to reward employees at least partially based on performance.
It's not just employee compensation, but what's truly best for the company/product which in turn helps employees, the consumer, etc.
Personally, I find the excuse of "buying our own stock is the best use of our cash right now" to be either a short term cop-out to bolster share price or extremely lazy management. There are so many facets of a business that can always be improved for much longer term success (and that's success for shareholders, employees, everyone).
My worst stock I ever bought is Telus. Unfortunately I didn’t sell it yet
Hadn’t heard of that one!
MPW bag holder here.
Same 😢
Lucid bag holder. Thanks Stock Moe. Actually my own fault but great lesson.
Lucid, nice! One of the things I like about stocks the most is that once you build up your own process it's truly an ongoing lesson in personal accountability. It sounds weird but I love that about it.
So many times people talk about or complain about the things that happen to them, but I feel like researching investments and making decisions is something we can control. Obviously we can't control the outcomes, but we can control our own decisions. I'm weird, ok bye lol
Got me for 5k and now worthless.
My worst is leg. I only had 3 shares lol but I'm down 40%
Wow! I didn't realize LEG was down 40% just over the past year, what happened there?
I have no idea why people think a loss-making business, with poor pe metrics and next to no moat as a "stuff-maker" for furnitures is a great investment
@@johnmonk3381 I'm new to investing, I saw many years of dividend growth and a nice yield. This was 3 years ago. Give me a break.
Doing share buybacks when they have negative FCF and negative Earnings should be prohibited. Share buybacks should only be allowed if the company can actually afford it with FCF and Earnings. Apple doing buybacks is good. Bed Bath and Beyond doing buybacks is bad.
My worst is maybe SQ oof so bad
I bought SQ in 2021 as well. I'm pretty sure I lost money on that buy, but I generally think SQ is an interesting company even though they've had some similar issues to SNAP. I don't consider them the worst simply because of that lol
Hi Matt, I am sorry for another comment here, but just remembered what you said about having too much cash in hand being a good thing for shareholders. I’m not sure about that, and I think Buffett would agree with me. He is always sincerely apologetic to his shareholders when he believes he is holding ‘too much cash’. The reason he apologizes is because he understands that people don’t buy his stock at a high P/E because they are happy about Berkshire cash on hand. They want their capital to be invested - ‘working’ capital - rather than having the company do the corporate equivalent of hiding cash under the mattress. Especially in a high-interest-rate environment, this is an important thing to note. Well done, however! And food for thought 😊
Agreed, I’m not saying it’s necessarily “good” that they have a lot of cash, but I don’t think it’s a bad problem to have. They have a lot of cash because they’re generating a lot of cash, because their businesses are dominant. That to me is a good thing.
In terms of having cash to deploy, each company will obviously be different but as an investor I’d prefer a company that generates a lot of cash every quarter and has to figure out what they can do with it than one that doesn’t.
Not saying this is the only perspective, but this was the idea I was trying to get across in the video
@@mattderron Awesome, and I do agree with you about it being a nice problem to have! Thanks for taking the time to reply :)
Not everyone does fractional shares. Charles Schwab does not do fractional shares. Moomoo does not do fractional shares. Firstrade does not do fractional shares. There are others but those are what I know off the top of my head.
Wow your lucky my first lessons cost me much more lol
To be fair, I've had many lessons where I lost money, but it wasn't so much buying a bad company as it was not knowing when something wasn't a long-term hold and when it was time to take profits.
I've had losers, they just were "decent companies" that just didn't work out. I had no clue what I was doing with SNAP and just got lucky
@mattderron yes sir!!! That also. I keep a vast majority in safe etfs BUT .....there is always a but. Lol great vids thank you.
i bought plenty of terrible stocks like Nio, Virgin galatic, First republic, Orbitial energy group
Virgin Galactic was one I looked at during 2021 but never bought, lucky for me I guess lol
Capital intensive businesses must always be avoided regardless of how cheap they get. I kept getting into these value traps before so i've learnt my lesson
That's why etf r better chiice
I’m new and invested in VOO and VGT with 3:1 ratio.
But since I started, VGT’s been performing bad haha
Any tips?
Honestly there’s nothing wrong with either of those and it might just be worth it to continue contributing to it and see how it does over a longer period of time. I only invested in VOO for years before I did anything else. Adding VGT just means you’ll be overweight tech companies and that’s probably fine over the long term.
There might be nothing to do but keep doing it and focus on how to increase your income and contribute more
Everyone understands if Matt only invested in ETFs, he'd have zero content. Literally weekly CZcams shorts saying "I bought a share of VOO, see ya next week for another share of......VOO."
@@travistarr9433 While this is probably true on some level (there are still a lot of ETF related topics to be explored though), I just want to point out that I'm not buying individual stocks so I can make content lol.
I'm buying individual stocks because I want to buy individual stocks. I frequently get the "but you're trailing the market so it's clearly not working" comments but it's literally been like 15 months. Trailing / beating the market never happens in a linear way. We're doing fine IMO
CTGLE
you'll have to explain this one to me lol
I just realized this was a ticker symbol, I’m slow sorry lol
Anyone who invests in individual stocks will have winners and losers. No one selects stocks perfectly. I have had my share of losers. That is for sure. But on the other hand, I have had my share of winners, too. That is the way it is with stocks. You just hope that the winners far exceeds the losers. If people cannot handle the emotional havoc it can play on their portfolios, they should just invest in index ETFs/mutual funds, and not look at the market, especially if they are long term investors. Index ETFs/mutual funds is a good way to invest for people that don't want to watch the market and do too much research. I started with mutual funds, and then transitioned part of my portfolio over to growth stocks, and dividend growth stocks.
My list of failures include teladoc, Alibaba, Disney, Tesla etc. good thing Nvidia made up for it all
Nice, one of the best lessons I've heard from Buffett and Peter Lynch - it'll only takes a few really great winners to make up for all the losers
my worst stock is MMM :/
MMM is a tough one, I'm sure I owned it at some point in the past. It's one of those "everyone knows this is a good company" stocks that people get swept into early on I feel like.
I did a video on them a while back, great company but not a great stock IMO. Too much uncertainty with the lawsuits.
@@mattderron yup definitely agree with you on that. i bought it pretty cheap ($125) as a turnaround play but it dipped since then and has remained low. Been holding for now since it’s such a small position but might sell soon depending on when i get around to it
Oh lord snap is a stinker
it really is
the worst stock i ever bought, there were too many and i would rather forget. now if it was the best stock i ever bought, that's easy.... 😁
Which is…?
@@mattderron microsoft of course. i got it in i think 1999, if i recall correctly (it was a long time ago) my 50 shares split into 200 shares and then nothing for a couple of decades. i even contemplated selling my shares when it was in the 30s but at the time i stopped investing (after the bubble burst). fortunately i still have the 200, now 200+ shares at 400+/share. these days, in my retirement, i've learn with the help of youtube on how to be a better investor. after a few more bad stock picks i've mainly settled on etfs and of course a couple of shares of the mag 7 stocks here and there when they dip
Amazing!