The morning breeze, the aroma of breakfast and the hustle and bustle of the city surrounds me like a everchanging kaleidesocpe as I dreamily think of the next article that I can write to benefit investors. I flip open my app and I see something in surprise. Oriental Watch and Emperor Watch have both gone up in price. Years of investing and disecting this very subject has taught me that even if the price of a stock rises, it could still fall the very next month and put one in negative territory.
The whole idea then is to be humble and to be even minded in adversity and in favourable conditions. If I may suggest further, understanding the concept of the margin of safety and actively applying it makes for better investing results. With regards to Oriental Watch and Emperor Watch then, where is that margin of safety one may ask. You need only read my articles prior to this one to find that out for yourself. Of course, you could choose to disagree with me!
Oriental Watch is currently trading at 1.72 HKD and Emperor Watch is trading at 0.345 HKD as I write this.
Price chart of Emperor Watch for 3 months
Price chart of Oriental Watch for the last 3 months
As I look at the news surrounding the company, there really isn’t any positive news coming out of both companies or maybe there is some but I can’t seem to find them. Despite that lack of positive news, what can be the cause of its recent surge ?
What we see here is evident of the reversion to mean. The reversion to mean is a very powerful mental model to have as novice investor and this is how it works. When you flip a coin 10 times, you may get 2 heads and 8 tails. But if you flip a coin 10,000 times, you would probably get 5000 heads and 5000 tails. And the keyword is “probably” here. Try that experiment yourself and convince yourself of it if you are intellectually curious. There is no compulsion to believe in anything that I say afterall!
So what we have is the scenario where over a large number of data, you see a tendency towards the mean of 50% heads and 50% tails.
This is probably one of the major reasons of its recent surge. There really is not much more I can say besides this. And I will leave it at that.
I leave you with a quote that perhaps summarises my feelings in this very article. ” In victory, be humble. In defeat, be strong. In all things, be fair.”
Thank you for reading and may all my readers be blessed with prosperity and abundance!