investmentShould you invest in CCL(Carnival Corp) / DAL (Delta airline)?

I have seen reviews on stocks more often than usual these days. Probably because many people see this drop in prices an opportunity to buy more than a crisis.

“The fundamentals of the company has not changed.”

“this is the best time to acquire this asset at a discounted price.”

“buy at a discount and wait for it to grow over long term.”

“this is a big international company. It has very little chance of going bankrupt.”

“The cash flow position of this company is still strong.”

“No crisis will last forever. We have to take advantage of this opportunity to buy stocks for 10% of its original price.”

There are simply too many information out there — blogs, youtube, social media… nowadays, everyone can become a stock or investment expert easily. Just take out the smartphone and film your views, and this kind of information has even greater influence than the traditional publishing house. Financial youtubers have tens of thousands of followers who watch and listen to their views about how the stock market is going, and whether to invest in a stock or not.

The ease of information is both a blessing and a curse. Blessing is that information empowers people and help us to make better decisions. Curse is that information overload has caused delay in judgment, distractions, misjudgments, and it is getting harder to verify the accuracy, relevancy and applicability of the information.

Filtering investment information

Just like there are “rich dad” and “poor dad”, “good debt” and “bad debt”, “good expenses” and “bad expenses”, there are “good information” and “bad information”. Information are not born the same.

Good information helps us make better decision and hence make money.

Bad information distorts us from doing the right thing and causes us to loss money.

Filtering investment information is perhaps (arguably) the most important lesson, even more so than stock picking, analysing financial statements and management team etc. Without filtering, we fall into the trap of mixing opinions with facts, hence affecting our decisions and actions.

Facts vs opinion

Whenever we hear a piece of investment information, 99% of the time it is an opinion. The stock market in particular, is filled with people who do not make money but are very willing and happy to share their views and opinions for free. It happens everywhere — at restaurants, cafes, supermarkets, etc.

For example, “the fundamentals of the company has not changed.”

If we ask “what makes you think that?”, they will pull out more rumours like “oh, I heard they still have many cash. And come on, people still want to go on a cruise from time to time.”

How many of the people saying that actually go to the financial statements and find out how much cash is reserved in the company? And how do they know that the cash reserve is sufficient for how long? Running a cruise business could be costly, and without customers, the ships would still be burning money at the harbour. No one knows how long this will last, and so no one actually knows whether the cash is sufficient. Even if it is, without new cash flowing in, it is like a body without the ability to produce new blood, how long can it last? Perhaps the fundamentals have not changed for the company — but still there is no customers! This one thing alone can kill any company!

I am not against opinion. After all, this article is a production of opinion as well. But the takeaway here is that we need to think for ourselves and be careful when we receive any information, especially when it comes to investment.

One tactics that I find extremely useful in getting closer to facts and truth is keep asking “what makes you / me think that?”. Just like we keep removing the skin of an onion layer-by-layer, this stimulates us to think deeper and with more clarity.

Who is the truth?

There is only one truth — the stock market. Regardless of what we think or say, the market is the only fact. Knowing this, we should pay more attention on the market rather than what others say. Even if CCL or DAL has very strong fundamental, if the market trend is against them, the truth lies always, always with the market.