When Investors Act Like Sports Fans
NEW YORK ( TheStreet) --
"What some call emotion, some call results"
-- An Apple(AAPL) bull
Apple bulls are walking on sunshine right now. I can hear Katrina and the Waves playing in the background.
And that's good. I never have a problem with people making money.
That said, you absolutely must exercise caution when emotion starts influencing the discourse. One reader noted that when Netflix(NFLX) last year was rallying from $50 to $300, the "comment wars" got more and more intense until the company's fundamentals brought the stock back to earth.
The reader compared those debates to what has happened recently when articles with long-term bearish outlooks on Apple have been published.
There are similarities in the intensity of the arguing, although Netflix was moving up on air and false hopes while Apple's move up is "real." In fact, shares could continue to rise and it wouldn't be irrational.
Apple shares are moving up because the company is firing on all cylinders. Business is good and, for the time being, more than sustainable.
If you pay attention to the "comment wars" the reader refers to, however, you do see that some Apple longs are beginning to sound like the longs who live and die with lesser companies such as Netflix, Research In Motion (RIMM) and Sirius XM (SIRI) .
I consider this an important harbinger of things to come. If nothing ever goes wrong for Apple, this conversation is moot. But that does not mean it is not a conversation worth having.
Assuming my outlook or some other long-term bearish case plays out and Apple begins to falter a year or two down the line, will Apple bulls do what NFLX, RIMM and SIRI devotees have done? Will they stay long and defend their stock to the death? Will they start talking and thinking more and more like sports fans?
The most loyal RIMM and SIRI longs use the pronoun "we" when they refer to the company. Just like sports fans, they feel like they have become part of something and need to defend it no matter what. They live and die with their stock and bleed the company's colors.
If you have experienced success as an AAPL long, it has very little to do with emotion. Certainly, some level of emotion kept you in the stock during its many somewhat scary dives over the last year or two.
I am not sure how much I associate sticking with long-term conviction during near-term, noise-induced weakness with emotion, though; instead, when fundamentals do not change, it's relatively boring, smart investing.
You have zero to do with the direction of a company or the trajectory of its stock. Your emotion drives absolutely nothing. All it can do is help you lose money somewhere along the line.