Interesting phenomenon yesterday. The worst-performing stocks of the last year are the best-performing one yesterday.   Some of the most unusual trading in stocks that I’ve seen. Today I think you see traders that found it easy shorting the worst-performing stocks, getting their own clocks cleaned today  Chewy is up 23%, Elastic up 18.91%, UIpath up 16%, and even Roblox up 15.88%. All of these names are down 50-90% from their highs. These kinds of daily moves are not normal.

 When picking a manager, a fund, ETF, etc chasing performance is a common mistake. You’re more likely to do better with the worst-performing fund of the last few years than investing in the best-performing fund. I learned that the hard way many years ago by investing in one of Bill Miller’s funds.  He was having a stellar year. As soon as I invested he was down 52% that year. Painful lesson.

Lots of people are unfortunately learning that same lesson now with Cathie Woods, the ubiquitous manager of the ARKK Innovation ETF.  Another case in point, the oil and gas sector was the absolutely worst sector in the market in 2020, with the futures price of oil briefly quoted in negative numbers.  That sector is the best performing sector in the market this year and along with utility stocks, the only two that are even positive.  Not surprisingly to me, that’s where the most insider buying was as well.  That’s not the case now.
I think the most successful investors find managers that they trust and believe in their strategy and discipline. Case in point, Warren Buffett and Berkshire Hathaway.
Quick quiz- if you believe in a manager’s strategy- when is it better to add additional money to it? After a period of outperformance or after a period of underperformance? I think we all know the answer but how many of us invest that way?