Passion Is Your Secret Weapon. How To Make It Your First Investment Filter
Not doing this from the start cost me thousands of dollars in tuition fees
Word Count: 956
Time Investment: 3 - 4 min
In early 2022 something rare happened. $META began an 8 months long 70% decline. In the world of investing that is a rare opportunity.
In the early stages the narrative was that people didn’t understand the Metaverse. Why would we all want Avatars of ourselves in virtual worlds?
In the middle stage it was analysts and media outlets being baffled by $60 billion in Capital Expenditures. Why would Zuckerberg spend so much money on a virtual cartoon world that people will not spend that much time in?
In the last stage towards the winter of 2022 all of a sudden social media as we know it is over and META might be a value trap. TikTok is overtaking META with short form videos, a change Zuckerberg did not see coming.
As these things unfold, it is difficult to not be influenced by the headlines and negative stories. And of course you should be conscious of the narrative, because we need to investigate the reasons. After all, in 2007 several companies also began a gradual decline and they never recovered.
“If you’re not worried, you should worry”
~Ray Dalio
What made all the difference in my determination, and why I was able to continuously buy META shares throughout the uncertainty and worry I was feeling, was not some incredible knowledge I had over others, or some analysis I did that was better. No.
It was Passion
“The key to success in value investing is to combine competency with passion.”
~Li Lu
The Incredible Power of Passion
You see, passion drove me to read all annual reports, quarterly reports and earnings call transcripts from 2018 all the way to Q1 of 2022. I loved the reading, because it felt good to learn about what was going on. With this passion I learned that 75% of the Capital Expenditures were for physical hardware to build out the computer infrastructure to “own the next paradigm” shift and to make headsets.
My passion for wanting to know about the competitive landscape helped me understand that META has withstood other competition in the past. META beat MySpace and outlived SNAP quite nicely. In response to TikTok META already announced and launched Reels and said it will build it, learn the customer behavior and then monetize it in a year or two.
My passion made me realize that the Metaverse everyone in the media was freaking out about, was a small part of a much larger investment into AI and infrastructure. So with an extensive amount of reading it seemed much more likely that a company that makes billions of dollars a quarter in Free Cash Flow, despite the CapEx will likely not go bankrupt anytime soon.
It was my passion that has now made 4x my money in a company that has so much un-monitized potential.
Passion To The Rescue
Many of you are now looking at a similar situation with Google. The media is blasting us with headlines and stories about how AI is attacking Google Search, how Google is losing Browser search share in Safari for the first time and how their cash flow generation will be impacted.
If you feel passionate about search and AI, about autonomous vehicles, about AI advancements in science and you have watched how powerful YouTube is, you will have already realized that the future of Google is not in immediate danger.
Waymo is doing 250,000 RoboTaxi rides a week, while Tesla is just talking about it. YouTube’s ad revenue of $36b is growing annually, it has TV subscriptions, streams movies, sports and has 125 million subscribers.
Did I mention that Google's AI can translate Dolphins and synthesize protein structures to help create better medicine in the future? And they have their own AI search that works exactly like ChatGPT, it just is being rolled out more carefully to transition current legacy search customers? And that this is not all
The Art Of Investing Is Emotional In Nature
You can learn everything about how to think about investing from Books, Buffett and YouTube. If you’re motivated you can do that in 3 months. But to fully understand how your emotions will affect your decision making, cannot be learned from books alone. It requires self-awareness, guidance and most of all a desire.
How To Be More Successful In Investing
Create a passion filter
If you are reading an annual report and you have to re-read the same paragraph three times, stop reading and move on.
If you need to make yourself study an industry, stop and move on.
If you are not interested in autonomous vehicles, but feel this urge to follow up on GOOG, don’t. Stop, move on to what you care about.
There are endless companies to study and endless industries.
The most assured way to become good in a few and to build a solid circle of competence is to feel passionate about researching and reading about it.
Do This Every Day From Now On
Get a notebook (digital or paper, either way)
Journal your investment journey every day
Focus specifically on what makes you bored, tired, is difficult to read, what distracts you and what makes you feel excited, curious etc.
Build your passion filter
This is the first step in becoming more self-aware as an investor. It is all so important, because without it, your heart and mind are not working together and you will make a lot of costly decisions.
Trust me, with the awareness alone, your process will naturally adjust and become more effective.
Wanna go the extra mile?
Journal how you feel about the news you see and read every day. Start becoming aware of the effect your information environment has on you.