Daddy – What’s A Bubble? And How I Hunt For Growth Stocks…

Before I get started, my friend Bill Fradin’s wife – Dr. Fradin – has a new book out titled ‘Parenting In A Pandemic‘ which I thought could be a timely share.

Onward…

I jinxed the markets yesterday. Sorry.

I am not sure we are in a bubble, but many of our biggest companies have made parabolic moves higher in the last 60 days.

My friend Bart has a good look at parabolic moves and I like this explanation:

In parabolic moves think of physics and Ps. Ps=sustained power. we had numbers memorized when I flew fighters for the Navy .. what altitude, airspeed, G would give you the BEST turn rate and radius to perform the jet. What sustained power could you work to max perform it …? If you went outside the box you are going to trade something …

I can blog this now because I’m a decade + out of the Navy. Back in the day, off the coast of SoCal we took the jet from 250 feet over the ocean and lit the cans (afterburner) got a ton of speed up and zooooooom up we went. Straight up bullseye (nose 90 degrees high) and we topped out above 60,000 ft. (I’ll leave it at that)

The coolest thing about topping out was the jet was STILL in full afterburner …but guess what, it just wouldn’t go any higher and then it flipped over on its back, flopped around out of control and fell like a stone. Nothing to worry about when your 10 miles above the earth but still a little erie to be honest. What happened? Well Ps went to zero. Yup .. the power to keep the jet climbing was gone. Night night, we were done …. the SAME THING HAPPENS IN THE STOCK MARKET WITH PARABOLIC MOVES.

I still vividly remember Qualcomm in 1999. The stock went from $3 to $60 ($2 billion to 70 billion) in a matter of months. The company was not bad, but it took 20 years for the company to grow into the valuation before it would march to new highs this year.

This TikTok video about Tesla is definitely a sign of the bubblish times as well.

I am not going to change my strategy. I have just been taking close note of our field position and adjusting my allocations to the markets.

I will keep hunting for companies and their stocks in big trends.

I spent some time talking with JC about how I think about spotting the next big growth stocks which I hope you find helpful. There are some funny edits and riffs about talking dogs so give it a watch.

PS – My golf swing is finally coming around.