Replies to post #629853 on Zeev's Turnips Patch-No Politics (ZEEV)

[fabian]

tjwny...Re: Bias...

Why now?
A reminder on bias is timely any day, any month of the year.
As we mentioned, bias is perma- bullish bias as well as perma-bearish bias.
We could not go into all types of bias and how they creep into decision making.
Just one example of a personal nature to shed some light:
We have mentioned JST in a positive light for months and reported multiple buys on the way up. We intend it to be a long term hold with significantly higher price targets.
In some ways we have "loved" the company and stock.
Friday the stock got creamed on high volume even though their eps was up 46%. That made it a D stock and if you have followed our posts, you know what that means.
So, we have a stock we love and it was hit out of the blue Friday and within 2 minutes of the open became a D stock.
[technically, the worst category to be in IOHO]
That leaves us with a dilemma...tough choices.
If we hang on to a bias of "love", it could significantly hurt short to intermediate performance if we hang onto an overweight position in that stock.
It would be very easy to take the "love BIAS" way out and say...
"Hey earnings were better than expected, up 46%, much higher margins, still only 11 X earnings, we won't sell any because the market is wrong".
That's the kind of bias that can get an investor in real trouble.
One needs to asses the positives and negatives and come to a conclusion irrespective of what one has said or thought before.
You have stated that the problem you have had is not bias.
We were stating a generalization that we have observed among many year after year.
If it does not apply to you or any other particular reader, then it may not apply.
The generalization is correct though and to some extent we all must deal with biases we have, even if they are not the big category perma bull or perma bear variety of bias.
good luck,
Mike
Bias is not the only potential pitfall traders or investors face.
problems of the kind you are describing are also true.
For us, those are subjects for future articles.
One being....
Rules Change,
Another partially covered in the past...
Herding behavior and negative results from being a part of it.