Past isn’t the Present

One of the most common mistakes I see in evaluating stocks is overly relying on the history of stock price. The market is a fickle bitch. It takes a decade for it to become a weighing machine instead of a voting machine.

Even the greatest stocks struggle to outgrow insane expectations. When looking at a history of a company, you need to look at their actions, not the market.

Stocks that interest me on this front: Duolingo and Airbnb. Duolingo had a nice run after IPO, but recently has been significantly bleeding. Airbnb IPO’d as a mature company that traded at a steep valuation. Despite solid performance, Airbnb stock struggled because of that steep valuation. Now trading at a more reasonable valuation, simply evaluating Airbnb based on their prior stock performance doesn’t make sense. Evaluation their operational performance instead and compare that against their current valuation.

I’ll come back to Airbnb and Duolingo with deeper dives at some point.