Cathie Wood is forgetting something Warren Buffett warned of 26 years ago

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by BenDoverR8Now

In his 1996 shareholder letter, Warren Buffett wrote about the underperformance of active investing. According to Buffett, he believed that he is an intelligent investor because he has the patience to be inactive. While most managers and asset allocators are trading their winners because it has gone up a lot or because it has become too large of a portion of the fund, Buffett simply holds and lets his winners ride.

The analogy that Buffett used was one from basketball. From Buffett:

To suggest that this investor should sell off portions of his most successful investments simply because they have come to dominate his portfolio is akin to suggesting that the Bulls trade Michael Jordan because he has become so important to the team.

It seems that Cathie Wood is falling prey to this exact problem. She is selling her winner in $TSLA to buy other beaten down stocks because they have some form of innovation or potential that the market is currently missing. This approach works…until it doesn’t.

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Happy New Year to All!

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