Dan Kline doesn't fret about volatility in the markets. Here's why.
May 22, 2021
As an investor, I worry very little about volatility. Stocks move both up and down for no reason or fairly stupid reasons. Sometimes an analyst rating — something I value slightly less than a horoscope or a fortune cookie fortune — moves a stock’s price meaningfully. That has no bearing on the actual value of the company.
In general, my portfolio, except for the Maxx Chatsko picks part of it, contains mostly stable companies. That would normally mean I’d experience less volatility than my colleagues who own a lot of high-flying tech stocks, but recently that has not been entirety true.
My profession forces me to look at stock prices on a daily basis. When it comes to my portfolio, if a stock moves by 5% or more in either direction, I’ll generally do a quick scan for news stories (though it’s pretty rare I miss a news story since I’m always looking for ideas for “7investing Now”).
If there’s actually news I’ll do a quick mental calculation as to whether that news actually matters to me. Walt Disney (NYSE: DIS) stock fell around 5% after-hours when the company recently reported results. That happened because analysts were worried about the company “only” adding nine million new streaming subscribers.
In reality, the Disney streaming numbers have been stellar but growth will fluctuate based on content production and rollouts around the world. The recent results were in no way discouraging and I don’t believe they’re part of some sort of downward trend.
Aside from the streaming numbers, Disney actually had an impressive quarter and it’s clear that the company has a clear path to getting back to its pre-pandemic norms (perhaps with a nice holiday bump due to pent-up demand).
Disney falls into the category of excellent company with top-tier management. Short of some sort of major scandal, there’s almost nothing which would shake my confidence in the company and that’s true for most of my portfolio.
Are there guideposts I watch along the way? Of course. I’m eager, for example, to see how the second Planet 13 location performs. That’s a major event for the company and its success or struggles will say a lot about how my thesis plays out. I don’t, however, pay any attention to stock moves related to that company based on pretty much any other news.
Volatile markets create buying opportunities. I never really worry about price when I make a stock purchase but seeing a big drop in something I planned to buy could make me purchase it sooner. In that case, I might transfer money to my investing account ahead of schedule. Consider it sort of a loan to myself that just pushes up my timetable to take care of favorable pricing.
Share price can move for no reason. In fact, in the short-term, that happens quite a bit. You can use that as an opportunity but it’s not something you should spend a lot of time worrying about. Buy good companies and hold them through volatility.
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