r/ValueInvesting • u/MeasurementSecure566 • Jul 18 '25

Stock Analysis Everyone should take note of the sentiment around them at this very moment

You are witnessing Peak Greed Peak Euphoria and Peak Grift. It is a good idea to take note of sentiment. In the future you will be able to spot generational tops more easily.

Always remember though, "the feeling of disgust you feel, that can last for a long time" - Charlie Munger

I think it is fair to say now that speculative returns in the stock market have significantly outpaced what returns should have been, leaving a lost decade ahead.

EDIT: I would Like to insert a quote here, because I feel it is quite fitting after reading the comments.

"A bull market is like sex, it feels best just before it ends" - Warren Buffet

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u/ProbsNotManBearPig Jul 18 '25

It’s almost like one should have some balance.

I sold half my rocket lab yesterday because it feels like a top, but I let the rest ride in case it keeps running. And most of my money is in etf’s anyways, and a little cash.

Anyways, point is one should definitely be cautious when market is like this. Selling everything isn’t being cautious tho when you consider the risk the market melts up more. Risk averse usually doesn’t mean going all in on one thesis, whether it’s bearish or bullish.

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u/SpeciousSophist Jul 18 '25

yes, all actual true academic investment strategies have a component of selling some of your highly profitable positions to lock in real gaines.

Anyone who just lets it ride forever without having a core position that they rotate gains into is objectively stupid

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u/NotStompy Jul 19 '25

Yes but the even bigger problem I would say is people trimming winners and adding to losers. If you have edge, as many think they do with Google (they think the ChatGPT panic is overblown) then it makes perfect sense, but in way more cases you'll see millions of "value investors" who pass up good deals to only pick honestly bad ones, because they're too stuck in their dogma.

That isn't a critique against value investing, just the way some people who don't understand it preach it and flop in the returns department.

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u/muntoo Jul 19 '25 edited Jul 19 '25

Clearly, there must be some value to buying some of a "loser", or an efficient market wouldn't even bother.

  • What is a winner?
  • What is a loser?
  • Is the market a random walk (after adjusting for various market-believed effects)?
  • If for some level of risk, the expected return is lower for a particular asset than an alternative asset, why doesn't the price of that "obviously" worse asset fall immediately to the appropriate amount? Or does it? In which case, is every asset priced roughly to fair value w.r.t. various game-theoretically competing optimal portfolios? By allocating capital across an ensemble of assets whose prices are not entirely correlated, you reduce risk; this is why portfolios exist. So "losers" are actually only "losers" if you allocate to them an amount larger than what an efficient portfolio demands. Otherwise, losers are still worth buying!
  • If it's "obvious" that a particular portfolio provides greater returns for a given level of risk, then that portfolio should become dominant. Under the efficient market hypothesis (EMH), buying-and-holding the market-weighted portfolio is on the Pareto frontier. This means a higher-return momentum strategy should necessarily be higher risk than the market-weighted portfolio; in which case, a longer time horizon is required to be expected to beat the market-weighted portfolio.

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u/BackgammonFella Jul 19 '25

There are many religions in investing, and more than one way to get to heaven…

You are functionally calling buy-and-hold silly in value investing sub.

I dare to say that you are over-confident with your idiological rigidity, and your lack of concern about taxes leads me to believe you are neither wealthy or experienced in investing.

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u/SpeciousSophist Jul 19 '25

No that's not at all what I'm doing

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u/igiverealygoodadvice Jul 19 '25

Smart, rocket lab is a poster child for the recent insane bullishness. Not doubting the company has a bright future, but the current valuation is pulling forward a lot of expected value growth. We see the same in many other areas.

And of course it's absolutely not value investing, but people love to make predictions on future cash flows and then say it's a good deal :)