It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.

Let’s modify it a little for another perspective on avoiding dire mistakes:

“It’s not what you’re wrong about, it’s what you’re right about that just doesn’t matter”

Here’s a perfect example to illustrate this point.

Before moving forward, I want to stop and mention that I’m not calling anybody out.  Odds are this research is more right than wrong except for one important thing and THAT is the point of this writing.

This firm Kerrisdale was short and wrote bearishly about Straight Path Communications in 2015 and again in January.  Here are a couple of excerpts from a January note:

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These folks did all this research on the relevance of 5G and digging up details on spectrum licenses and all of this work that makes you feel smart and like you’re the axe on a name and space.  They conclude Straight Path’s IP is not that valuable and there is little reason for anybody to want to own it.

..And then this happens a few months later:  AT&T comes in with a bid at a 150%+ Premium.

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All of that hard work and probably correct in theory research means nothing.  In fact, that hard work and research actually blows a portfolio’s year out of the water.  All because AT&T saw some value in the assets to protect their moat.

That’s why the markets are so humbling.  That’s why we always have to prepare for any outcome, including the worst.  The future is just unknowable.


Another example for technical traders is Incyte.  Heading into the weekend it had formed a nice base right above the rising 50 day moving average.  What a nice low risk entry, right?

But it didn’t turn out that way.  Bad news comes out over the weekend and the stock gaps down 10% on Monday.

incy

There’s nothing you can do.  The technical setup didn’t matter.  All you can do is quickly take your loss and move on.

Markets are tough.

Trade ’em Well

Disclosure:  I have no position in any securities mentioned

For inquiries on premium research for both individual investors and professionals, contact:  Aaron@NorthStarTA.com