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Comment by 3pt14159 | Hacker News Reader

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead.

1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down.

2. Physics based thinking. I knew electric cars were going to work because the math checked out.

3. Economics of scale works. Find companies that understand this and focus on it. When I saw Telsa focussing on a single car for a year I knew they would be a winner.

4. Software scales. People like to make money. Combine the two and its a real winner.

5. Sell when forward price to earnings after cash starts to look wonky. Which was 2007 and I think 2019. Covid and the direct stimulus kinda messed up the timing, but the market is still completely screwed. Either way, sell early and buy the crash.

Telsa, Apple, Shopify, Amazon, Google. Only really lost on Etsy (I can't believe how much they missed the opportunity to become a real platform).

Why bother investing in GM through a broad index fund if I know for sure Tesla will eat their lunch?

This isn't really get-rich-quick. This is looking at companies rationally and projecting where they will be in a year or two. And rationally speaking this market is out of wack and I wouldn't advise investing in even my favourite tech companies right now. I don't think this is Japanese Tech level of readjustment. I think there will be a -%50 S&P500 crash, maybe more, and then in 10 years Apple will be worth more than double what it is worth today. They have fundamentally better technology. Their software competency is below average, but their hardware, fit and finish, design, and cultural cache is world class and it is hard for me to imagine any scenario where they lose other than a US war with China.

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> Software scales. People like to make money. Combine the two and its a real winner.

There were plenty of tech losers. You still had to pick the winners.

> Physics based thinking. I knew electric cars were going to work because the math checked out.

Electric cars were obvious, but Tesla was not an obvious play. In hindsight, it might seem so, but in the beginning it was far from clear that Tesla would dominate the space. Additionally, time will tell if Tesla's stock stays 8x higher than its pre-pandemic price.

> Sell when forward price to earnings after cash starts to look wonky. Which was 2007 and I think 2019.

This happened many more times than the two massive crashes. If you actually followed this advice, you'd probably be worse off than investing in the s&p - even if you did pick good stocks.

As others have mentioned, beating the market with $1M invested is much easier than beating the market with $10B invested. Especially when your appetite for potentially losing money is much higher.

Let's naively assume that you actually can pick stocks. At $10Bn - you need to pick more stocks - otherwise you would drive up the price too much in buying that much of the stock - unless you only picked Apple and Google and MSFT and Amazon.

Driving the price of a stock higher is a bad thing?

Also why are you calling his actions naive ? He made money as did others.

The goal is to buy the largest percentage of the company with as little money as possible.

If the asks in an order book are (price, quantity) pairs of (p0, q0), (p1, q1), etc. with p0 < p1 < ... and you have $C in capital, then ignoring the "driving price of a stock higher" effect(i.e. if C/p0 < q0) you could buy floor(C/p0) shares.

However, if you purchase more than q0 shares, those will be priced at p1, p2, etc. and you'll instead buy C/(weighted_average([p0, p1, ...], [q0, q1, ... q_remainder]) shares(where the weights are the quantities). And because p0 < p1 < p2 ..., this will be fewer shares than C/p0.

At the extreme end, if you try to "clear out the order book", a stock that is nominally $10 you'd be paying $1 million per share to someone that put in a joke order to sell. So you'd be getting 100,000x fewer shares per marginal capital deployed compared to a smaller investor.

>Electric cars were obvious, but Tesla was not an obvious play. In hindsight, it might seem so, but in the beginning it was far from clear that Tesla would dominate the space. Additionally, time will tell if Tesla's stock stays 8x higher than its pre-pandemic price.

Tesla's stock price isn't really related to the fundamentals. It's a meme stock that, as you note, benefited hugely from the increased retail interest in stocks during Covid. Even if the GP got into it by looking at the fundamentals their profit is (mostly) because of its status as a meme stock.

I agree it's a meme stock now, but it wasn't always a meme stock. There was a time where it was severely undervalued and that's when I bought. I did not hold it all the way to the top. I sold it way before then.

In retrospect, Tesla was undervalued, but this wasn't a guarantee. Elon is a loose cannon with a history of overpromising to the extent of borderline lying. This got him in trouble with the SEC (funding secured), and he lost his board chair position and could have been ousted as CEO. In hindsight, the SEC obviously wouldn't screw over the fastest growing American company for a dumb meme tweet, but this isn't something people knew at the time.

Fastest growing in what way?

Tesla is hardly growing profits or revenues at the rate of Google and Apple. And their profits are already 50-100x bigger...

It's only fastest growing in asset price.

> Let's naively assume that you actually can pick stocks. At $10Bn - you need to pick more stocks - otherwise you would drive up the price too much in buying that much of the stock

This refrain is common enough, but I don't think it really bears out in the math. Elon just sold $16B worth of stock and the price barely budged. If you've got enough alpha to work with every beta seller out there will hop off and it's well, well before the peak.

> There were plenty of tech losers. You still had to pick the winners.

Yes because I applied basic reasoning. People were still investing in AOL and Yahoo when I picked Google. Seriously. AOL and Yahoo. It was bananas. Every person I knew that had any amount of tech savviness was on Google. The search results were clearly superior. "Invest in products that are better" should be a meme on WSB or something.

What I didn't mention above was that in the mid 2000s I also made money off of oil because I was following China's modernization and politics in the middle east. People back then pushed me on just how much oil would go up and when I said I thought it could triple they looked at me sideways. But it nearly tripled then I sold. I tried to get into lithium through SQM, because I thought electric cars and widespread computing were going to strain supplies, but they didn't. That's when I learned the lesson that over time commodities go down.

> If you actually followed this advice, you'd probably be worse off than investing in the s&p - even if you did pick good stocks.

Not really? Buying in at the very lowest part of 2009 gives a lot of range to play with. This bullrun is much, much longer than most, but over time I think it's easier to dodge the correction than to call the top. The reason for this is that to call the top is to predict when human irrationality reverses. Something I'm not great at doing. What I'm good at is first principles. And at some point I don't care how much blood there is in the streets. That fucking share of Apple is undervalued enough to where I would sell priceless art to buy it.

> Buying in at the very lowest part of 2009 gives a lot of range to play with.

Got it.

Step #1 - pick good stocks.

Step #2 - have perfect timing.

> Elon just sold $16B worth of stock and the price barely budged.

I could be wrong, but my understanding that such huge trades are not put on the market the normal way, but run through big investment banks that are able to use different techniques to avoid harming the stock price. For example, they can exchange the shares with hedge funds, ETFs/mutual funds, pension funds, and they can do the trades in batches over several days.

Elon's sale arguably brought down the price of Tesla considerably. He pretty much announced the sale at the peak - it's down almost 40% from that - when the s&p isn't even down 20%.

But, anyway, a wealth manager investing billions would do the same thing in reverse to buy.

And, still, it would drive up the price unless done over a long period of time - and since timing is important - this isn't really an option.

Thus, why it is harder to invest $10Bn than $1M.

I've invested in GM and avoided investing in Tesla. Mostly just because I understand GM, their business and financials and stock price history makes sense to me. I do not understand the valuations on Tesla, and hadn't even long before COVID and the most recent run-up in value. Clearly I've missed out on massive earnings if I had invested in Tesla instead of GM (although GM's done decently lately).

To me looking at the stock pricing, Tesla looks like a software company where tremendous growth has been occurring and is expected to continue for some time. To some extent they are a software company, but that software so far has seemed to me to require quite an expensive set of hardware to be sold with it in order to get the software and continuing monthly/yearly/feature revenues sales. This has worked for Apple, so it's not unprecedented, but it'll be interesting to watch how long it can last.

SpaceX makes more sense to me with having high valuations relative to revenues, it's a services company. The service is getting things to space and now also providing internet access. Tesla doesn't look like a software or services company to me, at least not yet. But maybe I'm looking at it wrong?

Possibly the reason I don't see Tesla as a services or software company is because I have very little faith that level 5 autonomous driving is going to be a thing in the near future. I could be very wrong, and if Tesla's existing hardware on the road can do it, then THAT would be a game changer and very easily justify the current stock price to me.

Forget the stock price. Look at operating margins, operating leverage, delivery volume, trailing delivery volume growth, battery supply, dealership contracts.

> Forget the stock price. Look at operating margins, operating leverage, delivery volume, trailing delivery volume growth, battery supply, dealership contracts.

All of these things can be good and the company could be set up for profitability and success, and yet the stock price is _still_ overpriced.

GM stock is current priced as 2.7 Billion dollars per Electric Vehicle sold last quarter. TSLA stock is current priced as 2.7 Million dollars per Electric Vehicle Sold last quarter.

TSLA is the "overpriced" stock?

GM only sold a handful of EVs in the 4th quarter of 2021, I'll give you that.

But in previous quarters they sold quite a lot more EVs than they did in the 4th quarter. This dismal 4th quarter EV sales statistic was partly due to supply constraints and partly due to the Bolt battery recall.

> Look at operating margins, operating leverage, delivery volume, trailing delivery volume growth, battery supply, dealership contracts.

and you think by looking at those you are going to notice some things that analysts in that market have not noticed and is actionable by you because you can tell the current stock price is not correct? Isn't the future performance of Tesla affected by the number of people in its target markets who can afford them? why didn't you look at population demographics?

Do you think Wall St. analysts have a history of being correct? Most are wrong more than they are right. This guy is pretty good, but he was late to the game. https://markets.businessinsider.com/news/stocks/here-s-why-m...

This link shows the change in demand for EVs https://www.iea.org/data-and-statistics/charts/global-sales-...

The fact that our best performing models for the risk-neutral price of equities are unbiased random walks tell me that yes, in aggregate, Wall Street is really good at being correct.

>I've invested in GM and avoided investing in Tesla. Mostly just because I understand GM, their business and financials and stock price history makes sense to me. I do not understand the valuations on Tesla, and hadn't even long before COVID and the most recent run-up in value. Clearly I've missed out on massive earnings if I had invested in Tesla instead of GM (although GM's done decently lately).

I'm not currently invested in automotive. Just drive by some dealerships, empty lots. Not because they are selling out but because business is bad. There will be a work from home permanence, the inflation reality will destroy the automotive industry. The only thing keeping them barely afloat is low interest rates.

Then you also have the market disruptor of Tesla. Ford and GM obviously have some fantastic products coming and even some already here. EV silverado and hummer are amazing. Mach-E and EV f150 are possibly the best.

EV cars is a new generation of vehicle and will harm the existing auto industry. Ford and GM are obviously going to survive no problem. They arent worth a trillion $ because they are behind but have significant costs upcoming. GM and Ford's upcoming profitability is going to be quite poor.

Stellantis looks like they are too far behind. Ram revolution silouette looks good but if the Chevy Bolt proves anything... building a good battery has many hurdles. Stellantis has nothing coming soon and may just die.

>To me looking at the stock pricing, Tesla looks like a software company where tremendous growth has been occurring and is expected to continue for some time. To some extent they are a software company, but that software so far has seemed to me to require quite an expensive set of hardware to be sold with it in order to get the software and continuing monthly/yearly/feature revenues sales. This has worked for Apple, so it's not unprecedented, but it'll be interesting to watch how long it can last.

Tesla's first disruption is that after the car leaves the lot. It continues to get better. The traditional auto industry, you leave the lot and your car will be that or worse forever.

The second big disruption is efficiency. AC motors have regen, their motors are ~90% efficient. This creates the new generation of car. A model 3 performance(inexpensive sedan) has a 0-60 of 3.2 seconds. That's faster than all production Corvettes. Faster than a Hellcat. As fast as a Mclaren F1 from back in the day. About as fast as a Nissan GTR or Porsche 911. All the while not being annoying loud, far more practicality, and no emissions.

The most recently disruption... Tesla is now the fastest car with the plaid edition. 0-60 of 2 seconds model s plaid means it's faster than the Demon. Faster than all hyper cars. Yet at significantly cheaper price point. The roadster coming with compressed air to make it faster? Ridiculous.

By the time Ford/GM really get going, Tesla will not have sat around. They will have moved forward.

This is why Tesla has a ridiculous valuation. They effectively are the only competitor in the auto industry for the next several years.

There's lots of weird takes in your comment, but this one:

> I'm not currently invested in automotive. Just drive by some dealerships, empty lots. Not because they are selling out but because business is bad.

is a bad take. Dealer lots are empty because of supply chain constraints. Cars are selling as fast as they come in. Desirable new models like the Ford Maverick have months long waiting lists. Used cars that are 2, 3 and even 4 years old are selling for new or higher-than-new prices.

> The second big disruption is efficiency. AC motors have regen, their motors are ~90% efficient. This creates the new generation of car. A model 3 performance(inexpensive sedan) has a 0-60 of 3.2 seconds. That's faster than all production Corvettes. Faster than a Hellcat. As fast as a Mclaren F1 from back in the day. About as fast as a Nissan GTR or Porsche 911. All the while not being annoying loud, far more practicality, and no emissions.

meh. even cheap hot hatches are close to being too fast to fully use on public roads these days. the race to ever quicker 0-60 times is incredibly boring and misguided imo.

a model 3 probably is superior to a hellcat in every measurable way, I'll give you that. although I doubt most hellcat owners would willingly trade them in for anything lacking a loud V8.

but people don't buy Porsches to drag race. there have always been much cheaper vehicles that would beat them handily on a drag strip; it's not what they're are designed for. they are pretty fast on the track, but unlike a Tesla, the appeal of a Porsche cannot be summarized in a single performance metric.

>meh. even cheap hot hatches are close to being too fast to fully use on public roads these days. the race to ever quicker 0-60 times is incredibly boring and misguided imo.

currently drive a hot hatch. Can confirm this. The magic number for me is probably around 4.5s. Anything faster is really not needed.

>a model 3 probably is superior to a hellcat in every measurable way, I'll give you that. although I doubt most hellcat owners would willingly trade them in for anything lacking a loud V8.

Ironically... had hellcat before this. Can confirm this as well. I do miss the supercharged v8 whine.

>but people don't buy Porsches to drag race. there have always been much cheaper vehicles that would beat them handily on a drag strip; it's not what they're are designed for. they are pretty fast on the track, but unlike a Tesla, the appeal of a Porsche cannot be summarized in a single performance metric.

My next vehicle will most likely be an EV truck. I think this is what you are missing right there. I would bet the majority of people driving porsche have not taken them to a track. That's not the purpose.

A car with good accelerating power will automatically give me a high speed performance. ~ Ferdinand Porsche.

I cant find the exact quote, but Porsche said, To build a car that drives well at 200km/h, you must build it to go 300km/h.

Tesla plaid doing 2 second 0=60 is idiotically fast as you would agree. It's not about that. It's about driving it without doing that.

everyone has their own taste I suppose. my next car will likely be a gr86 if I can get one for MSRP. it will be slower, less practical, and have a worse interior than my current DD. but I expect it will be much more fun to drive.

I've driven a couple teslas as well as porsches and amgs. the instant torque from an EV is a very cool feeling, but to me it's not enough to offset the refinement and handling feel of the current best ICEs. I found the interior and overall fit and finish of the teslas I've been in to be quite poor for the price. if you're not tearing away from every stoplight, I guess I don't see why you would get a car like that as a driving enthusiast. I think the real appeal will come when the prices drop a bit more and they become the most straightforward way to get from A to B. after all, this is the only real requirement most people have for their vehicles.

It's worth noting that the game is fundamentally _easier_ if you're not working with an institutionally sized portfolio.

1. You don't have concern yourself with market impact

2. There are niche opportunities that lack the capacity for funds to bother spending their time on.

Cuts both ways, in my opinion.

Institutional portfolios have access to more opportunities and talent than retail investors.

The market impact point doesn't cut both ways though, and it's crucial.

> institutionally sized portfolio

Is the part that cuts both ways.

Not in the ways that matter to the point I'm making

> Physics based thinking. I knew electric cars were going to work because the math checked out

Does it mean that the price is going to go up? Suppose everybody thinks like you (I assume everybody does), the market price may reflect anticipated profits already and doesn't necessarily have to go up.

Also success of Tesla isn't the same thing as success of electric cars.

As of now? I don't think so. But I did that math back in 2001 or 2002, way before Tesla was publicly traded.

What's the math?

Not OP but I remember watching a movie "Who killed the electric car?" in highschool. It's about the EV1, an electric car by GM in the 90s. It had a range of 70-100 miles. If I remember correctly the movie kind of insinuates that the oil lobby ultimately prevented the model from releasing/selling well. So just based on that, the knowledge that electric cars are a viable substitute for a lot (in Europe I'd say most) of use cases has been quite readily available.

But that's the problem in OP's reasoning. Simply knowing that electric cars will dominate in the future is pretty worthless as investment advice. Especially when we are talking about tesla, which's stock price is entirely decoupled from any fundamental values. Today, I actually think that becoming one of many car makers is the best-case scenario tesla can hope for. It was always the question whether they can get enough of a head start in self-driving and battery tech BEFORE traditional car makers start making EVs. Those have decades of a head-start in every other aspect of car making. And to me it seems that most of them fully committed to EVs in the last 1-2 years. So will Tesla's advantage in battery tech buy them enough time to make cars that are as safe and reliable as traditional cars?

Also: I really don't know much about cars, so I might be wrong about pretty much everything I just said :) But it shows nicely that you can find logically sound arguments about future developments which are worth absolutely nothing on the stock market. Just look at the stock market since the beginning of Covid.

Same math that showed Betamax would dominate?

> Either way, sell early and buy the crash.

Trying to time the market is akin to individual stock picking.

When it works, it’s usually just luck.

No it can be skill. Was Warren Buffet and Charlie munger just lucky, year after year? Was Michael Burry of the Big Short just lucky to short the mortgage backed securities market, no he also side stepped the dot com crash and bought value stocks, recently he had very nice shorts on Kathy Woods ARKK... clearly he isn't just lucky, he has skill. I used to think I have skill yet my results were random for about a decade, then I grew a lot emotionally and in wisdom/perspective, and now I too beat the market average in both return and risk.

Quoting the original commenter:

> There are people with more capital, time, and knowledge than you who will consistently beat you.

Maybe you are one of those people, but the point is not everyone is good at it (the majority of people are bad at it)

Buffet and Munger manage the companies they buy. You, 99.99% of stock purchasers, and I are dependent on the existing management with no control over decisions companies make. Big difference.

Actually they don't. They put managers in place and are largely hands off on the running of their acquisitions.

They pick the manager and understand their personalities and backgrounds fully. That is far from hands-off.

Buffet’s last good move was the deal he got for Goldman Sachs in 2007. Then he said he was not going to invest in tech companies because he did not invest in businesses he did not understand, then he dumped a bunch of money in IBM which obviously did terrible, then he relented and finally bought a ton of Apple in 2014 or 2015, which has single-handedly saved Berkshire and kept it relevant.

I also would like to see objective proof of how well Burry has done since 2008 compared to the basically risk-less and cost-less VOO or VTI.

Apple, in absolute terms, has been his best investment (iirc). But yeah. The law of large numbers has gotten him. When you have to invest hundreds of billions, it’s impossible to keep compounding at high rates. I’d put a lot of money on Buffett beating the market if he was managing $50M.

It is possible the parameters of the world changed so much that Buffett’s expertise is not as useful as it once was.

It’s possible. It’ll take another decade of Guy Spier and friends underperforming for me to be convinced of it.

One of Buffett’s built-in edges is access to cheap capital through his insurance companies [1]. That matters less in a low-interest rate environment, which has been the dominant regime for the last 20 years.

[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3197185

Better than Coke?

These days Apple is not really a "growth" prospect developing something speculative, it's more of a "cash cow" collecting rents.

The former would be the kind of "tech stock" he would avoid; the Apple of today (the latter) is the kind of predictable business Buffett does invest in.

You cite emotional and wisdom/perspective growth, can you opine on that further?

You don't miss all the crashes, but there are some fundamentals that when they get out of whack at best you get a flat market for years and at worse you see a crash. Why buy into an overhyped market?

Because you don't know if it's overhyped or not.

> I keep beating the market

I keep "beating the market" too though I calculated my risk adjusted return and with that metric I wasn't.

So really I was doing better because I'd cranked up the risk, and fortunately we've been experiencing a bull market.

Hard to say whether I've really been making savvy choices or if it's just been a bull market trend that has been saving my ass.

>fortunately we've been experiencing a bull market

Exactly. Tell me how you did in 2008, not how you're doing in a bull market.

When I was completely new to investing I put my money into AAPL, TSLA, AMD and TSM based on my experiences with them. That portfolio would have done extremely well had I stuck with it.

I think the dogmatic "nobody can beat the markets" is hurting people who then think they may as well give up, and patently not true when you look at traders who beat the market year in and year out, and minimize their losses when they do lose.

It's a stochastic argument though. If, say, 60% of day traders lose money, then 40% necessarily make money -- but it's still EV negative unless you have a strong prior you belong in the 40%.

If you drill down into "beat the market" you realize it is a language problem not an investing problem.

If "beat the market" means that you can predict exactly if and when Russia invades Ukraine, then the answer is NO, you cannot know if some drunk soldier is going to accidently shoot off a missile and start a war.

On the other hand, if "beat the market" means that you invest in companies with solid fundamentals and solid management in areas of the economy that are not shrinking at prices that are historically low, then yes you can beat the market in the long term. Buffet and Munger are obvious examples of this.

If "beat the market" means buy everything except NKLA, because that company has obviously been a scam for over a year, then yes "beating the market" is very easy.

Actually I think you have it backwards. The notion that traders consistently beat the market is hurting a lot of people. There are extremely few traders who beat the market year over year. It becomes vanishingly fewer every year you add. Which is what you would expect for a system where luck plays a big role and nobody can actually predict the market.

Tldr; way too many people believe that a lot of people can beat the market and that is what actually hurts the most investors.

edit: spelling

How much do you know about the stock market and trading? No offense but I want to know whether I am speaking with someone who has been trading for a few years and has come to this conclusion or someone who read it on a headline somewhere.

While I do have some experience, that's not really that relevant. I'm not saying this because of my own experience (which would be anecdotal evidence). It's based on actual market data, which is what is actually important for making a generalization like this. Many statistics show that overwhelmingly, active investors underperform indexes. And that is especially true year over year because a lot more people can get lucky a few times but they cannot consistently reproduce those results.

One example of some data that shows this is the SPIVA score cards. Here's a nice page that explains it and presents some of the recent results: https://www.bogleheads.org/wiki/SPIVA_scorecards

There is tons of other information if you just Google for it. When it comes to actual evidence of performance, the facts are pretty clear!

How about you? Do you have any objective data to show otherwise?

> I think there will be a -%50 S&P500 crash, maybe more, and then in 10 years Apple will be worth more than double what it is worth today.

An important point here is that since nobody knows when this crash will happen or how long it will last or where the bottom will be, you should still keep investing in the companies you think are fundamentally strong and avoid trying to time the downturn.

It is easy to say in hindsight but consider the case of Iomega.

https://markets.businessinsider.com/news/stocks/big-short-in...

In 1997 a friend who worked at Cisco told me to go all out on Iomega. He also advised me to invest in some 3D storage startup which well went nowhere. No matter how smart you are you just have to play percentages.

Even better consider the case of Cisco itself. It reached market cap of 500B around 2000 and despite being a solid company has not performed too well.

Thus it is quite conceivable that the inevitable market correction will bring the high flyers down.

That is Apple will still be extremely strong, Google might suffer a bit because of dropping ad spend.

Companies such as Shopify, Tesla will actually need to reach reasonable P/E ratios, not the insane ones now.

Tesla is trading at a 50x PE (2022 consensus) and plans to grow 50%+ in 2023, 2024.

I don't think that you can expect the stock to be where it is today in 2024 if the PE actually goes down to 12. You'll need to buy it now to lock in that PE of your purchase price.

It is trailing 170 P/E, obviously trailing earnings are not so useful for high growth companies but question is Tesla really a high growth company any more?

The consensus is that Tesla is not priced just for cars, it is priced on some other "intangibles".

Elon has said that Tesla's advantage will be manufacturing. If he is right and the global demand for EVs continues to accelerate, TSLA's PE will be below 6 at current prices before it is no longer growing 20%+ a year.

I would never argue with your success. And I do think you can pick solid companies and beat the market in the long run (mostly by avoiding the big losses).

But it’s not enough to pick winning industries. In every industry there are winners and losers. You have to pick winning industries and winning companies. And sometimes winners become losers. So there’s a timing aspect also.

EVs are going to succeed but I don’t think Tesla was ever a guaranteed success. And Tesla is not guaranteed to keep winning (though they have a great head start and very strong moat).

So how do you know if all of your reasoning hasn't been calculated into the price yet?

Maybe everybody knows Tesla is going to win out, therefore everybody wants it, and the price rises like crazy. And then the stock is way overpriced for what you get, and people like you still keep buying it.

There is a reason why Buffet needs to look into the numbers before deciding if something is a good buy or not. You buy underpriced, and sell overpriced. And you just cannot make that judgement without looking at the numbers.

There is another simple theory about your single stocks outperforming the index: smaller cap stocks generally outperform the index. As shown in this video, a monkey can pick stocks and outperform the index just because of this simple reason: https://www.youtube.com/watch?v=5_3Ra-Q6vK4.

You can be assured that all the known public information is reflected in a stock's price at a given point in time. Which doesn't mean that profits can't be made in the market.

There is so much wrong in this post.

> People keep telling me this, but I keep beating the market.

"Humans keep telling me it's hard to predict football games, but if you just squeeze your tentacles up and down enough you will get it right as I did"

-- Paul the Octopus, who predicted all world game results

There are millions of people trying to predict the market. Of course there will be people that did good, and these people (such as yourself) will all be convinced that they got it right for a reason.

But individual experiences mean nothing against the law of large numbers. You yourself have no way to know whether you're good or lucky, unless you show us an algorithm that consistently achieves the results you claim to enjoy.

Remember these simple facts:

- the less you trade, the further away you are from your real average predictive power. If the game is a coin toss and you play 2 times, there is a 25% chance that you get a 100% success rate, and go to HN to boast about how guessing a coin flip is easy. Try to keep that performance after 5000 games and it's an other story.

- Are you able to compute your idiosyncratic returns correctly? Can you show us that your portfolio returns, once residualized on sector, country and beta, are actually any better than a random pick?

- You pretty much only talk about good old common sense fundamental quality / value, which is far from being a major part of equity returns. You reasoning will work for one stock, and not for an other one. A sime value based strategy as you describe is vastly negative on a 20 year period - in absolute terms (not even compared to the market).

- You seem to have no understanding of diversification, and idiosyncratic risk. Companies can fail for an infinite amount of reasons. The less positions you have, the more sensible to "single company failure risk" you are exposed to. Very good companies, with solid earning and projections, did fail on the past, for reasons such as "top management scandal", "defective line of product", "banned from operations in a country", etc etc.

To anyone reading this comment, just remember that 90% of stocks returns do NOT come from the company itself. It comes from the drive of the market or sector as a whole. By investing in broad index funds you lower your specific risk, and get overall exposure to what drives the vast majority of the stock returns.

> It's been 20 years or so of applying very basic reasoning

Would note that we’ve been in about a single interest rate regime for almost precisely that amount of time.

And 40 years of declining interest rates.

Almost none of the posts talk about what investing traditionally has been for-- buying future cash flows at a current discount. Sign of the times....

> Apple ... Their software competency is below average

This doesn't sound right. I'd put them as way above average. Possibly leading the pack out of the public companies.

> Why bother investing in GM through a broad index fund if I know for sure Tesla will eat their lunch?

Because even bad stocks are an essential component of a balanced portfolio if they reduce overall portfolio beta (volatility).

The name of the game isn't pure gains, because the gains are not guaranteed. You want to make gains and hold onto them.

And no, you don't know for sure that Tesla will eat their lunch. You have a very high level of confidence that they will. So does the rest of the market, that's why Tesla is trading at a huge premium relative to its financial fundamentals. But this wasn't always the case, and there were more than a few times when Elon Musk brought Tesla to the brink of bankruptcy. If you were confident that Tesla was going to pull through, even back then, you either a) knew something the market didn't, b) were mistaken/wrong (but luck pulled through for you in the end), or c) you were reckless / irrational.

"When I saw Telsa focussing on a single car for a year I knew they would be a winner."

And they still have terrible quality of assembly.

"Telsa, Apple, Shopify, Amazon, Google."

Isn't this really just 'invest in SV scaleups? What are the forecasts for Xiaomi, or s Panasonic?

> 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down.

You can make money on things that go down as long as they are not too strongly correlated with other things, and you maintain a constant fraction portfolio. One of the search terms here is "volatility pumping", I believe.

That's true. Not my game, but it is true.

Commodities are bad long term bets…

Commodities are a stabilizer for portfolios… they let you take more risk in other parts of your portfolio because they are easily marketable, non-productive assets.

Equities on the other hand have unknown amounts and timing for cash flows. Hence people bid the value of stocks up, down, and all around.

> I think there will be a -%50 S&P500 crash, maybe more

And this is why I am going against the advice of the majority(?) and trying to time buying into the S&P 500. I am looking for another crash like the one around when COVID started. Am I wrong and should I also not try to time the market?

One bit you are missing is that it's entirely possible that today is the cheapest the S&P 500 will ever be. What if your 50% crash only comes after the market has tripled?

Another is this: What if the market crashes 40% but then goes back up? Do you buy at 40% down? What about 30% then?

It's easy to say "well I'll just buy at the bottom" but you can't know when the bottom is until well after it's happened.

The other major piece of the puzzle is that during a 30-50% crash, everyone you know and all the media will be screaming in your ears about how everyone is losing all their money in stocks, and that the only reasonable thing to do is sell now so you don't lose it all. Do you have the stomach to put all your money into the market in those conditions?

I bought GOOG in 2005 and TSLA in 2014. Similarly, I don't see why I would buy Facebook or GM as part of an index fund when their growth potential looks terrible when compared to TSLA and GOOG.

If I was 70 and couldn't afford a 5 year correction, things would be different

substitute Ford for Tesla in the early part of the last century, and on the timescales you are talking about, General Motors ate Ford's lunch.

furthermore, Musk is very impulsive and could already have been cancelled by the SEC for his mistakes: I bring that up to point out that by hitching your wagon to this one individual (or Henry Ford) you are taking on enormous risk, risk that is diversifiable and there's no reward for.

I've been hearing about how GM and Toyota will beat Tesla since 2014.

GM delivered electric 26 cars last quarter. Toyota "hopes" to make 3.5m EVs in 2030.

you missed the point, when GM surpassed Ford a hundred years ago, Ford was as new as Tesla, and GM was a newer player with fresh ideas that better fit the market, and nobody saw it coming, especially Ford. You see, GM was run by a managerial and marketing genius, and Ford was run by Aspergers. (I can say that, I am one)

Unfortunately GM went bankrupt. Ford and Tesla are the only US car companies that have never gone bankrupt

Ford is the only one of the so-called “big 3” who hasn't filed for bankruptcy at least once, but there are lots of other US auto manufacturers, and many of them haven't filed for bankruptcy.

I think this makes sense.

However, I am sure there are many people who have lost money (or made much less) with reasonings that may be at least as sound as this one.

Since you claimed to have beaten the market for 20 years consistently, would you care to provide evidence for that claim?

Their investment in Tesla alone would be more than enough evidence, if they got in near their IPO.

Throw in an investment in Apple when everyone started switching to Mac circa 2006 (I told everyone who would listen to buy it, but I was a college freshman, so no one listened, but it was so obvious), and you got a stew going.

It didn’t take anything fancy to crush the market if you started 20 years ago and were dialed into tech.

I also didn't mention buying Bitcoin, which I did on credit.

People don't like hearing that the market can be beat because they don't like feeling inadequate. But it can be beat if you understand industries and physics and consumer sentiment. Bonus if you can read financials, but even some basic market indicators are good enough.

I wonder why people who tell me this do not have a driver, private jet, and a chef, even after telling it to me for over a decade. In the biggest bull market in history.

In fact, they all still go to work for someone else.

This is spot on. Everyone who is confident and correct in their ability to consistently beat the market for decades is obscenely wealthy. The math is really straightforward. Even a paltry initial investment will compound massively over the years if it has a high ROI.

Some people do have this ability and in fact have become very wealthy, but there are many orders of magnitude more people who think they have an edge but have just had a lucky run.

> People don't like hearing that the market can be beat because they don't like feeling inadequate.

I didn't dispute the fact that the market can be beaten. There's overwhelming evidence for that (e.g. Renaissance, Berkshire). I didn't even dispute your claim that you have beaten the market. I merely asked for some evidence to back up that claim. The fact that you responded without providing any evidence makes me think you actually haven't beaten the market consistently. Perhaps you have had one or two good bets that provided spectacular returns.

Pretty impressive to have foreseen, as a college freshman in 2006, the proliferation of broadband mobile internet and the development of mobile devices capable of taking high quality photos and video, mapping services, video calls, health tracking, and other functions that would obviate and consolidate multiple industries.

I was a teenager in 2006 and still understood mobile devices with fast internet connectivity with photos, videos, mapping services, and video calls were going to be a big thing soon, as to a tech nerd like me it was already partially a reality. By that time I already had Google Maps on my phone, was uploading photos to web services through MMS gateways, was browsing the web with Opera Mini, had my email on my device, and streaming internet radio to Bluetooth wireless headphones. It seemed obvious to me that these devices would get faster over time and that the cameras would get better, as I had already seen the progress from the earlier 320x240 cameras to >1MP cameras on phones, mobile data speeds increasing from GPRS speeds to 3G, and WiFi both becoming more common and jumping from 11Mbps to 54Mbps within just a few years. I had seen the greyscale and slow Palm IIx device my dad used to carry turn into the color Blackberry with constant network connectivity happen within a few years, it seemed obvious these devices' functionality would continue to rapidly grow and move into all kinds of markets.

In 2006 I don't know that I would have thought Apple would have dominated the market as much as it has, but the iPhone hadn't been announced yet nor would it have 3G for another year after that. In 2007 I got my first phone with a front-facing VGA camera which could do video calls over 3G networks, before the iPhone had native apps or 3G.

> In 2006 I don't know that I would have thought Apple would have dominated the market as much as it has,

But that is the most important point. The rest is trivial, but knowing which organization will be able to capitalize on it is the only relevant fact if you are trying to optimize for a return.

In 2006, the mobile network owners seemed in prime position to use their monopoly to squeeze everyone else, as well as Blackberry completely dominating the ecosystem.

In 2006, I do not know what kind of evidence a person would have had to KNOW apple, alphabet, Microsoft, Amazon, and Facebook would be where they are relative to ATT/Verizon/T-Mobile/Blackberry.

I agree, the challenge is seeing that it would be Apple that saw the gains moreso than 3Com, Nokia, LG, and others. There were tons of companies which were obvious plays at the time, several of which no longer exist.

> Their investment in Tesla alone would be more than enough evidence, if they got in near their IPO.

No it wouldn't. Sample size of one is not proof of consistently beating anything. If I showed you a winning lottery ticket, would you consider that as "more than enough evidence" of me consistently beating the lottery?

Did you invest in Toyota for its hydrogen-based battery tech?

What's your thesis for why rules such as these haven't been discovered and automated out of existence by the legions of smart well capitalized investors?

what is your return for each year over the last 20 years?

> People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead.

Remember, you don't have to beat those super smart well resourced AAA-grade investors. You just have to beat the average schmuck with some skin in the game.

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