It is okay to be early
But there is a catch!
A sudden positive management change at a major company we’re interested in sparked a question in my mind: Is it okay to be early? In stock investing, it often feels like you’re either too early or too late. Given the choice, I’d prefer the former over the latter. Let me explain why.
In general, I like to be early. Whether it’s for an event or an appointment, I like to have a margin of safety and arrive a bit ahead of time. The same principle applies when I buy stocks—I aim to get in before others recognize the potential improvement. Of course, there's a risk that you’re waiting at a bus stop where no buses are coming. But if you avoid that pitfall, you might secure a “better” seat and enjoy a longer ride than those who arrive late. However, there's a catch!
Not long ago, I noticed an unexpected yet welcome change in the leadership of a company we favor. When I showed interest in that investment, as is often the case, it lacked what many investors call a catalyst—an identifiable event that triggers an improvement in the business and, ideally, a shift in market perception.
I find it limiting to always insist on finding a catalyst. If a company exhibits the qualities I seek and the price is reasonable, I’m willing to buy and wait for change to unfold naturally over time.
A catalyst often implies a one-time event with a singular benefit, perhaps a sudden spike in the stock that makes headlines for a day. I’m more interested in a favorable long-term trajectory. In this scenario, instead of a one-time gain, we could benefit from years of compounding growth.
Compounding, as in earning interest on interest, can be more significant if the initial price is lower, which is often the case when there’s no obvious catalyst in sight and the general public becomes discouraged by the wait. That’s the catch!
It’s like waiting at a bus stop where no one has seen a bus for a while, but we all know that the odds improve the longer we wait—assuming, of course, it’s not a decommissioned line! Investing is much the same. If you’ve found an idea that makes sense but lacks an immediate spark, that’s perfectly fine. We don’t mind waiting. Positive change can be unexpected and sudden, so it’s better to be early than too late.
Happy Investing!
Bogumil Baranowski
Disclosure:
Blue Infinitas Capital, LLC is a registered investment adviser. The information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.