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What the Olympic Commentators Taught Me

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The other night, my wife, my parents, and I were watching the individual gymnastics finals for the women's vault. I'm not sure why it bothered me so much, but when the commentators gave their "expert" opinion on how things would play out, I semi-lost it.

I don't have an exact quote -- damn those trolls who keep NBC's copyrights enforced on YouTube -- but it went something like this: "It's pretty obvious that USA's McKayla Maroney's going to win gold. All the other girls are just focusing on silver. It's a foregone conclusion."

Excuse me? Why in the world are we even having the competition if it's a foregone conclusion? Shouldn't they just compete for silver while Maroney gets the gold based on the "expert consensus"? Have these commentators never heard of the Miracle on Ice, watched the Cardinals' ridiculous run to a championship last year, or seen the heavily favored Patriots lose twice to the Giants in the Super Bowl? 

Sure, preparation matters in sports. But once the game starts, you can throw it all out the window. No one knows for sure how things will play out, but it's what happens on the vault (or the field, or the court) that really matters -- nothing else.

I was put in the uncomfortable position of still rooting for Maroney, knowing that if she did win, not much attention would be paid to these brazen statements of fact. But those of you who watched know what happened: Maroney fell on her second vault, and Romania's Sandra Izbasa ended up taking the gold. 

So much for the foregone conclusion.

Turning the Foolish mirror on myself
And yet, when I was thinking about what I'd just seen, I couldn't help but think that in the past, I've slipped into the trap that the Olympic commentators did. Even when I include carefully selected words like "could" instead of "will"; when describing a stock's potential, I'm guilty of much the same sin.

Last year, I wrote an article called: "These Stocks Could Double Over the Next 2 Months." There's that key word I used to cover my butt: "Could." I guess that makes me a little better than the Olympic commentators, but not by much. 

Well, here's how the five stocks I picked out actually performed over the following two months:

Company Returns, July to September, 2011
Ebix (Nasdaq: EBIX  ) (19%)
Entropic (Nasdaq: ENTR  ) (51%)
First Solar (Nasdaq: FSLR  ) (17%)
SodaStream (Nasdaq: SODA  ) (35%)
Coinstar (Nasdaq: CSTR  ) (10%)

Source: Google Finance.

Pretty awful, huh?

My errors were many. First and foremost, I believed that a short-squeeze was highly likely, and that these companies would report higher earnings than investors foresaw. I also made the mistake of trying to guess where each companies' stock would go over a relatively short time period. As many Fools know, we advocate taking a minimum three-year time horizon when investing. 

But even when we do our Foolish best to make cool-headed, rational investing decisions, we are prone to the same error: assuming that we've got a unique insight into the future. The simple fact of the matter is that no one -- not even investing greats like Warren Buffett or our own David Gardner -- can predict the future.

So let this story act as a mea culpa. In the past, I have written things as if they were an absolute truth -- but included wording to technically make it a prediction. 

In the future, when I talk about stocks that I'm thinking of buying, I'll try my level best to make one thing clear: What I'm writing are simply the thoughts that I've had while reasoning out what I’ll invest in. There is absolutely no guarantee that I'll be right or wrong. 

There are tons of things you can do with whatever left over money you're lucky enough to save. You can invest it, let it be, or give it away -- among a plethora of other options. Clearly, Fools think investing in the stock market is worth considering. But we don't have special access to the future either, so look at us as more of a depository of ideas for you to weigh.

Now, let me offer you access to a special free report containing three ideas we have in our depository: Middle-Class Millionaire-Makers: 3 Stocks Wall Street's Too Rich to Notice.  In no way is the report you'll read guaranteed to make you any money. You'll see how some of our Foolish analysts think about three companies they think aren't getting much love from Wall Street right now. Get your copy of the report -- and some new ideas to digest -- today, absolutely free!

Fool contributor Brian Stoffel does not own shares of any of the companies mentioned. The Motley Fool owns shares of Ebix and Sodastream International. Motley Fool newsletter services have recommended buying shares of Sodastream International, Coinstar, and Ebix. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (6) | Recommend This Article (22)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 08, 2012, at 2:02 PM, alexxthegreat wrote:

    Timing is the most important variable in life. For one stock in your article, it appears the timing may be more in its favor now than it was when you first gave it your blessing.

    This is why.

    The difference between a good company and a great company is vision by its leadership. It looks like Entropic has planned a scenario that revolves around certain events.

    Entropic has timed its plans to coincide with the Olympics, Super bowl, World cup, increase in movie streaming and Baseball’s World Series, which will all play together at once for the first time in many years. Entropic has also moved to the S & P, this is another great piece of strategy in an election year.

    Rich Duprey says Entropic is a stock that is shaking the investment world. Entropic’s customers like Comcast and Direct TV and most of the others players in this field depend on internet and TV viewing to be in large numbers. This is the first year all of these events will coincide and hit Entropic customers all at once.

    Rich says that strong sales of Entropic Communications MoCA chips are propelling the living room connectivity specialist higher and the set-top-box SoC business is growing like gangbusters. The picture is already beginning to become clearer concerning a YOY picture.

    Entropic appears to be a year ahead of schedule in making Trident a seamless part of Entropic. The dramatic run up in YOY revenues and earnings is a lot easier to achieve with all the new initiatives and products. The events fit perfectly with the timing of the upgrade cycle by the major service providers of Entropic Moca 2 chips that is well underway. It looks like what Entropic has been doing is laying the groundwork (and very methodically and carefully) for what they believe will be a massive and sustained run up of their stock price at the end of this year and for the next couple of years.

    Everywhere that major service providers expand into in the future, they will be using Moca chips and whole home set top boxes. MOCA is a widespread and standard technology. Entropic has the best products and is the market leader. The company has been growing revenues at a staggering clip. On average, revenues have increased by double digits every year for the last four years. This year Entropic’s revenue will likely increase about fifty percent YOY. Profits are also ahead of schedule and coming in line quickly after the Trident purchase. It is a beautiful thing when a company doubles their income, has no debt, and has a stockpile of cash that continues to grow.

  • Report this Comment On August 08, 2012, at 6:40 PM, evn wrote:

    I for one really appreciate your willingness to state the obvious—no one knows what is going to happen in the next moment—it's called Life.

  • Report this Comment On August 08, 2012, at 8:50 PM, 2motley4words wrote:

    Thanks, Brian (and evn), for the reminder that, regardless of the realm---whether it be one's career, love life, old age, or investments---thinking that any expectation/prediction is a foregone conclusion almost always leads to a bad end.

    FWIW, I tend to think that there's a fundamental disconnect between the absolute contingency of existence and humans' urgent---and probably "hard-wired"---desire for certainty. Ultimately, we should ever remain aware that nothing's guaranteed, that the best that we can do is to try to suss out---and, if possible, prepare somewhat for---every conceivable scenario (and then remember that there will always be those pesky "unknown unknowns").

  • Report this Comment On August 09, 2012, at 5:47 PM, TMFDarwood11 wrote:

    Thanks for the article.

    I'd also say that what I've learned from the commentators is an almost mindless focus on the perceived "number one" to the detriment of everything else.

    Reminds me of investing, where we tend to look for the next home run, fixate on it, and ignore so many other good possibilities.

  • Report this Comment On August 10, 2012, at 2:38 AM, EvanBuck wrote:

    Great piece, Brian. It's important for all of us to learn that, as Yogi Berra once said, "It ain't over 'till it's over."

    Nothing is guaranteed in life. General Douglas MacArthur summed up the stock market and many things about life in general pretty well when he said, "There is no security on this earth; only opportunity."

  • Report this Comment On August 10, 2012, at 2:25 PM, whyaduck1128 wrote:

    Do these "experts" NBC uses for the Olympics get paid by the word, with extra credit for stating the obvious? Darn, I wish they'd STFU once in a while. Not every movement, breath, and fart requires excited commentary!

    The same applies to stock "analysis". We don't need "reasons" for everything, just the unusual. Stocks go up, stocks go down, there doesn't have to be a macro- or micro-reason.

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