Back in April, I explained that I am always shocked by the trust investors put in awful money managers like ARK Invest CEO Cathie Wood.
As you’ll recall, Wood manages the ARK Innovation ETF (ARKK).
When that article was published, the growth-oriented fund was down 70% from last year’s high and trading around $47 per share.
Well, since then, shares fell another 25% to the recent low at $35.10… And there’s still plenty more room to fall.
But believe it or not, there’s another famous “investor” out there who’s doing his best to underperform even Cathie’s terrible underperformance…
When Too Much is Not Enough
I’ve actually told you about Michael Saylor before in MicroStrategy and the Four Stages of the Stock Cycle.
But the BTC fanatic is back in the news this week, so we’re going to revisit that story…
Saylor, the CEO and Founder of MicroStrategy (MSTR), notified his Twitter followers yesterday that his company added 480 BTC to its stash for a cost of approximately $20,817 per coin.
That brings the company’s total BTC holdings to roughly 129,699 coins, which he says were purchased for an average price of about $30,664.
Wait a minute… Haven’t we heard this story before?
Yep! We saw Cathie Wood do pretty much the same thing with her various ARKK holdings…
For example, I told you before about how she played Teladoc Health, Inc. (TDOC).
She began buying when the stock was trending higher but just kept adding and adding to it even as the stock continued to fall.
The stock is down nearly 90% from its all-time high…
Throwing Good Money After Bad
Saylor is doing pretty much the same thing with BTC…
He continues to throw good money after bad, which basically means he’s trying to average down his cost and buy his way out of a bad situation.
Sure, sometimes this can work. But most of the time, it does not…
Especially when the asset you’re buying just won’t stop crashing.
With BTC down another 5% this morning to the $19,000 level, Saylor is already down over 8% on his latest purchase.
Overall, BTC has lost nearly 38% from MSTR’s average buy price, which equates to a loss of roughly $1.5 billion.
But that’s nothing compared to the 90% collapse in MSTR’s stock price…
So, what’s the lesson here?
Don’t Make the Same Mistake
Well, the first thing this can teach us is why the four stages of the stock cycle are so important.
Once you understand them, you’ll understand why you should never buy a security while it’s in the Distribution or Capitulation stage.
That’s what Cathie Wood and Michael Saylor have been doing, and you can see how it’s worked out for them…
But the real lesson is that you need to structure your portfolios and your trades so that your losers don’t get out of hand.
That may mean setting tighter stops, taking smaller positions or simply cutting losses early rather than adding to a losing trade.
All of these actions are signs of mature, experienced traders. And experienced traders know that they will encounter losing trades from time to time.
That’s the nature of the game… It’s how you deal with them that separates the good traders from the “wannabes.”
Follow the Money
The broad market is off of its recent lows by about 5%, but I’m still hesitant to say that we’ve seen the bottom of this selloff.
Unless we start to see massive buying by institutions, we won’t know for sure that the real bottom is in.
I’m talking about hedge funds, pension funds, endowments and other trillion-dollar organizations that are eventually going to start scooping up stocks at value levels.
And when they put their money to work, following their lead can pay off big time.
This is exactly what I focus on in my premium Stealth Trades research service.
Embrace the surge,
Editor, Stock Surge Daily