Buying High and Selling Low

In our thirty-year career as professional investors, we have been lucky to meet many talented investors.

One of the most talented is my old friend Phillipe Laffont.

Phillipe founded Coatue Capital Management in 1999. He is an alumnus of famed Tiger Management and was one of the original “Tiger Cubs.” Today, Coatue has grown into a diversified asset management company with over $40 billion in assets under management.

Phillipe and I got to know each other back when he formed Coatue, as I was at a similar fund at the time. We would sometimes talk about telecommunications and media stocks.

It has been incredible to see him build Coatue into one of history's most successful GROWTH managers.

He truly has a handle on identifying significant trends and monetizing them.

Another great thing about Phillipe is that he often shares his presentations to his investors with the public.

This is a rare opportunity to get insight into the process of one of the world’s most successful investors.

Recently, his firm posted a video of a presentation he gave at his firm’s annual East Meets West conference.

You can access a video of the full presentation and the slides here.

He kicked off this year’s conference with this contrarian statement…

“I want you to know that I have done well for 25 years by buying high and selling low. When you buy high, you buy the winners, and you let the market give you some direction and you buy companies that are working.”

He also noted that selling low helps you “get rid of some losers.”

This is the opposite of the traditional "buy low, sell high."

What does Phillipe mean by his statement that flies in the face of conventional wisdom?

We have written about growth investing and listening to the stock market's signals. Phillipe’s statement embodies both best practices.

When buying growth stocks, you are looking for stocks that can not only go up +100% but potentially +300%, +500%, +1000% or more.

A straightforward piece of math we like to share is to remember that for a stock to go up +500%, it must go up +100% first. This is a simple fact, but too many investors forget it.

They look at a stock that has doubled and think they missed it.

Many investors start their process by looking for the stocks that are down the most. The best investors I know look for the ones that are up the most and figure out if there is more upside.

Phillipe understands these principles well and has used them to become a billionaire.

He also understands the key to managing your losses.

His statement acknowledges that even if you think you are right – and may eventually be so – very often, a stock that is down is giving you a signal that you are wrong.

Instead of being a negative, it is helping you understand where you are making mistakes.

The key to successful GROWTH investing is cutting those losses while allowing your growth winners to realize their full potential.

We wanted to focus on this considerable picture insight, but we highly encourage you to watch the presentation and read the slides.

He analyzes AI and its impact on the markets intensively. He also provides insightful commentary on the software sector, the state of the private markets, and his core macro outlook.

While we don’t agree with all of it, we do agree with most of it and have HUGE respect for his insights.

Please do yourself a favor and go through this and his past presentations.

You can learn how buying high and selling low can make you a better investor!

HX Podcast

Enrique is joined by one of our readers and they discuss the outlook for the stock market in the near term and through year-end.  Enrique also gives an update on the HX FREE IDEA.

Check out our timely commentary to help YOU make money!

Click here to listen on your preferred platform or watch on YouTube below.

YouTube

The HX Podcast with Enrique Abeyta brings you up-to-date financial market commentary along with evergreen insights into investing, trading and building your financial future. Enrique has 30+ years experience as a professional investor having managed billions of dollar in his firms. He brings on other world class investors and special guests to discuss investing and trading in a humorous and approachable manner.