Case Study on Adobe : Test of patience or inefficient use of capital

3 min read

Adobe Inc., the powerhouse behind software like Photoshop and Adobe Reader, has captivated users for years. Its journey in the stock market reflects this dynamism, marked by significant highs and lows. Since 2001, the stock has experienced a rollercoaster ride, reaching soaring heights and plunging depths.

For investors, Adobe’s trajectory poses a significant challenge. Imagine waiting 14 long years for a stock to surpass its previous high. The patience required is immense, and many would find it difficult to hold onto their investment for so long. This prolonged period of stagnation can test even the most patient investor’s resolve.

However, what follows is truly remarkable. In just eight to nine years, Adobe’s stock price skyrocketed from $40 to a staggering $700. Such exponential growth is both enticing and nerve-wracking for investors. The rapid ascent is often accompanied by sharp corrections, adding to the volatility.

Navigating such turbulent waters requires a clear plan of action. Investors must determine when to hold, buy, or sell based on predefined strategies. For instance, avoiding stocks that remain stagnant for extended periods could lead investors to explore more lucrative opportunities elsewhere.

By adopting a dynamic approach, investors can capitalize on momentum shifts in the market. Riding the waves of upward momentum allows investors to maximize gains while minimizing exposure to prolonged drawdowns. This approach mitigates frustration and regrets associated with stagnant stocks.

The market is unpredictable, and stocks can remain stagnant for years before experiencing exponential growth. By adopting a strategic approach and staying flexible, investors can navigate the market’s ups and downs with ease.

WeekendInvesting Strategy Spotlight – It isn’t always about the multibaggers !

There has always been a frenzy in the stock market around multibaggers. 

You will often come across stories that go like this – “Oh I bought this stock when it was trading around Rs 25 and today it is trading at Rs 250”. “I made a handsome 10x on this stock”

But, people seldom discuss negative outcomes or stories of their failure. Aspects like risk mitigation, position sizing & opportunity cost often take a back seat paving way for cooler discussions around multibagger stocks. 

Consider the case of “VEDL”. After making a high of Rs 484, the stock has virtually remained flat for 14 long years. One may wonder whether it is even possible to successfully navigate through the troubled waters of a choppy stock like this one but that is where the beauty of momentum lies. 

VEDL entered Mi NNF 10 back in Apr 2021 at a time when most might wonder “Why now”. The stock may not have gone on to become a multibagger for the portfolio but just the fact that a rule based approach could successfully maneuver through a stock like this without having to face a loss & instead to come out with a reasonable gain of 50% speaks volumes about the ability of momentum investing to keep you calm and composed at all times without having to worry about the outcomes too much. 

So multibagger is not the only thing that sounds cool, 

Identifying and extracting momentum in a stock that has remained stagnant for 14 years is also a story worthy of a discussion. 

Disclaimers and disclosures : https://tinyurl.com/2763eyaz

If you have any questions, please write to support@weekendinvesting.com

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    Case Study on Adobe : Test of patience or inefficient use of capital