Dear copiers, followers, and investors,
Today, let's delve into the fascinating dynamics of volatility and stock correlation in the context of portfolio building.
Our portfolio includes several mid-cap stocks, which are known for their volatility. This characteristic is largely due to their smaller market capitalizations, resulting in more significant price fluctuations. While this volatility might seem daunting, it also presents unique opportunities for savvy investors.
Take, for instance, today's performances of $EAF (GrafTech International Ltd.) and $GCT (GigaCloud Technology Inc) . Despite both being part of our mid-cap holdings, their movements today were markedly different: EAF surged by 8%, while GCT dropped by 8%. This contrasting behavior might prompt some to question the risk involved. However, it's crucial to understand that volatility and risk are not synonymous.
Volatility refers to the degree of variation in a stock's price over time. High volatility means that a stock's price can change dramatically in a short period, in either direction. Many investors tend to equate this with risk, fearing the unpredictability it brings. However, this perspective can be limiting. Risk, in its true essence, relates to the potential for a permanent loss of capital. While volatility can indeed introduce short-term fluctuations and uncertainty, it does not inherently signify long-term risk.
In fact, volatility can be advantageous. It creates market inefficiencies, where stock prices deviate from their intrinsic values. As disciplined investors, we can exploit these inefficiencies. When the market overreacts to short-term events, it often undervalues solid companies, providing us with opportunities to buy quality stocks at discounted prices. Conversely, it can also present selling opportunities when prices become overinflated.
In our strategy, we embrace volatility as a tool rather than fear it as a threat. By carefully analyzing and selecting non-correlated volatile stocks, we aim to mitigate overall portfolio risk while positioning ourselves to capitalize on market mispricings.
Thank you for your continued trust and confidence. Together, let's navigate this volatility and seize the opportunities it presents.
Best regards,
Fernando Diez
@Banjoido... Show More
