I learned this approach from one of my growth investment advisors — even when you speculate, you’ve got to speculate resoundingly and confidently. Otherwise, you’ll never enjoy outsized gains. However, with troubled names like Nikola (NASDAQ:NKLA), the opposite is true. Tip-toeing your way into NKLA stock and its ilk can help prevent a gutting of your portfolio.
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Fortunately, I didn’t listen to my “advisor” — he’s really just a friend who has a knack for making money. Instead, I nibbled on NKLA stock with total nonsense money. Nevertheless, I paid dearly for this nonsense in the same way that you come to the realization that a particular batch of wasabi is much more potent than you’re used to.
By the time you feel that initial tingling in your nostrils, it’s already too late. You’ve just got to ride the pain, which can feel like a jackhammer being drilled into your brain. Tears and convulsions are common. In the best-case scenario, you’re in the comfort of your own home. In the worst case, you’re in a crowded sushi bar while everyone around you looks at you like you’re an idiot.
Welcome to my world.
I don’t care about the money that I lost, which was miniscule. I do care about getting things right as much as possible. Sure, I suppose everyone makes mistakes. And in a purely schadenfreude manner, I’m glad that I’m not one of the General Motors (NYSE:GM) executives that was supposed to be performing due diligence before partnering with Nikola.
Ultimately, this is one of those situations where — while I got torched for believing in NKLA stock, deservedly I might add — I must move forward. In a typical month, I’m writing the equivalent of 130 articles. Thus, there are 129 other stories that need to be written, hopefully ones that are much more interesting — and profitable — than Nikola.
Still, you might be wondering — is there a case for Nikola? Maybe. But it’s a junk thesis.
My InvestorPlace colleague Will Ashworth, a man who has a much more solid track record than my “advisor,” introduced me to StockTwits.com, a popular platform to discuss all things stocks. I use the term “discuss” loosely; it’s more a random collection of disparate thoughts and innuendos.
However, in my research, I came across a balanced, articulate post by user @Reelcharacter, who stated that only time will tell if Nikola’s apparently sincere efforts to perform damage control in the wake of founder Trevor Milton’s numerous false statements will spare (or even lift) NKLA stock.
To that, user @kWhit replied, “Are you sure you want to make a rationale [sic], well thought out comment on here? That’s StockTwit suicide.”
Indeed, that might have been the first post I’ve seen on the platform worth considering. And @Reelcharacter makes a reasonable point: Americans like people who take “the buck stops here” attitude regarding ownership of shortcomings.
It might help NKLA stock, though, to be fair, I think any company in Nikola’s position would do the same. Instead, I believe shares are dependent on a social media lifeline. And such a thesis is what I would term an “ICSH” trade, or “in case stuff happens.” By stuff, I mean the smelly kind, just to be clear.
But will stuff actually happen for NKLA stock? Currently, it doesn’t seem like it. Even in the insanity that is StockTwits, the users there aren’t that crazy to buy Nikola shares. But then again, isn’t the fact that people are not buying NKLA the perfect reason to buy it, at least in this topsy-turvy world where failing companies can get their market value 10X-ed precisely because they’re failing?
As you know from 2020, stranger things have happened.
That said, if you consider yourself a true fundamental investor, you’ll want to stay far away from NKLA stock. Then again, if you were really a fundamental person, you wouldn’t be reading this article.
However, it’s also possible — though incredibly, wildly remote — that a news item could positively change the trajectory of NKLA stock for good. Recently, I checked my portfolio to discover that Fisker (NYSE:FSR), another one of my speculative trades, is up big from the time I purchased it.
As these things go, I wish I purchased more. Now, the reason why Fisker jumped so much is because it entered into an agreement with Foxconn to produce a new Fisker-branded vehicle together. Like Nikola, Fisker is largely aspirational as it hasn’t proved its production and consumer demand cred yet. But just like that, FSR is suddenly looking very hot.
Of course, Nikola and Fisker are two different animals. For one thing, founder Henrik Fisker isn’t a chronic liar. And the Fisker Ocean, if it can launch at its proposed price point, offers incredibly compelling competition to Tesla (NASDAQ:TSLA).
But FSR appeared on a road to nowhere until this deal changed everything. Could a similar situation happen for Nikola? I doubt it, but again, stranger things have happened.
On the date of publication, Josh Enomoto held a long position in NKLA and FSR.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
The post If You’re a True Fundamental Investor, You’ll Stay Away From Nikola Stock appeared first on InvestorPlace.
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