Friends,
Most of us know Fred Rogers — better known as Mr. Rogers — for his three decades of children’s programming in North America. Here’s something you might not know: every morning, he weighed himself. And every morning, it came in at 143 lbs.
Why was this weight so consistent? Because it was vitally important to Rogers. The weight was a code for “I love you” (“I”-1 letter, “LOVE”-4 letters, “YOU”-3 letters), the three most important words to him.
We agree these are important (and hard) words to say out loud. But in the world of investing, there are three different words that loom even more important:
“I don’t know”
Imagine how much money has been lost by investors because they weren’t willing to admit to themselves, “I don’t know.”
Just last week, Stoffel was shooting a YouTube video covering Snowflake’s earnings (see below). In it, he was trying to answer a vital question: Does Snowflake have a moat?
He tried to cover all the angles: the good (beating estimates and raising guidance), the bad (gross margins contracting), and the ugly (an uninspiring conference call). But in the end, he came to this simple conclusion:
“Is this [an AI-fueled bump in revenue] going to be short-lived, or is it something that’s going to be enduring?
We don’t know!”
Now, you might argue that “we don’t know” anything about the future. And, of course, you’d be right. At the same time, investing involves getting comfortable with uncertainty.
So, how do we balance the fact that a certain level of uncertainty is required for investing with the fact that there are some things we can’t know?
We actually think one of the commenters on Stoffel’s YouTube video –@jerryhunter5242 — put it best:
The question is: if we are uncertain about SNOW’s moat, can we deploy our capital in an alternative vehicle with more certainty? The answer is always yes.
Jerry hit the nail on the head. The important thing is not whether we’re right or wrong with this specific example of Snowflake. The important thing is that we build a long-term process:
- Evaluate a company’s moat
- If confident in the durability of that moat, put the stock on your watchlist
- Buy over time at better and better value points
That’s it. That’s the long-term formula for dealing with uncertainty. Accept that “I don’t know” is the likely answer 90% of the time, double down on the 10% of the time where you’re confident, and let the chips fall where they may.
Wishing you investing success,
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Brian Feroldi, Brian Stoffel, & Brian Withers
Long Term Mindset
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P.S. Speaking of Moats — Join us on Thursday, Aug 29th at 12:00 EDT for a FREE investing masterclass: 5 Moats Every Investor Must Know. To RSVP instantly, click here.
