TOGA Stocks: The Ones that Got Away


If you just happened to lay on a position in a little stock called MyDx (MYDX) last Thursday, it was your lucky day. At one point on Thursday, MYDX was up nearly 56%. Congratulations!

There are a few tiny little problems with this issue, of course. MYDX is a speculative growth stock that trades on the bulletin board. The company’s product certainly sounds intriguing; it’s a battery powered, hand-held chemical analyzer that can detect pollutants in food, impurities in water and air, and will test cannabis for its mix of active compounds. But as of yet there's little in the way of sales. 

Also, your timing would have had to be perfect, as MYDX has been in a downtrend for quite a while. So if you bought more than about four months ago, you might still be under water in the stock. The chart will tell the story of the stock’s fortunes since its IPO last August.

But none of that matters to some investors; they see only the 56% that they missed by not miraculously buying MYDX at the very bottom.

I’m not surprised that I didn’t get any questions about MYDX from subscribers. After all, it’s a bulletin board stock that trades under a dollar per share and averages just 14,000 shares traded per day. My subscribers are generally too sophisticated to fall for this kind of highly speculative growth stock, which is essentially a bug looking for a windshield.

But my topic today is what I call TOGA stocks, which stands for The Ones that Got Away.

I got an email a few weeks back from an acquaintance who is still beating himself up because he didn’t buy Cisco Systems (CSCO) at 10 cents per share (split-adjusted) in 1990 and sell it at 80 in 2000.

While it’s true that multiplying your original investment 800-fold is an attractive possibility, this guy’s regret is hogwash. Nobody would have held CSCO through the big corrections in 1991 and 1994, and very few would hold fast during the 1997 pullback.

And absolutely nobody—NOBODY!—would have sold right at the top in March 2000. Here’s a mouth-watering chart that shows CSCO’s run from the beginning of 1990 to March 2001.

If this guy wants to regret things like this, he might as well regret that he didn’t buy the winning ticket to last week’s lottery.

In growth investing, you have to have a particular mix of personality traits, with enough optimism to let you get into new bull markets after long bear stretches. 

Growth investors must have to have discipline to allow them to cut losses short when growth stocks go south. And they must have to have enough perspective on the market to let them shrug off the regret when TOGA stocks make them think about what might have been. 

Fortune Cookie 

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Mike’s Comment: I have no idea who Jim Rohn is, but after reading this quote, I'm convinced he could be a great investor. Many believe investing involves some secret system that predicts the future, and (as portrayed in some movies) is incredibly tense and exciting. But, really, the best investors have a few core principles and, most importantly, have the discipline to follow them time and again, even when it's tempting not to. Consistency and discipline are the real Holy Grails of investing.

Paul’s Comment: Jim Rohn was a motivational speaker, which is not usually my favorite group of philosophers, but he nailed this one. Markets have millions of moving parts, but the rules that govern success in the market can be boiled down to just a few. And starting with Carlton Lutts, our founder, Cabot has been distilling market rules for more than four decades.


Paul Goodwin
Chief Analyst, Cabot Emerging Markets Report

Paul Goodwin can be found on Google Plus.

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