When It Comes to Investing, Discipline Trumps Conviction

I’m writing to let you know that I’m aware of the massive volatility taking place in our stocks today. However, it’s important you know that these price movements are completely unrelated to the health of our companies, as I explained to you last week.

Stocks like Viveve Medical Inc. (Nasdaq: VIVE) and Quantenna Communications (Nasdaq: QTNA) have been hit particularly hard because of their extreme illiquidity, which the market makers use to their advantage whenever the market is down.

I believe this is happening because the market makers can sense that this sell-down in small-caps is nearly over, and as a result they’re trying to shake as many people as possible out of good positions before prices start to rebound.

That’s because, in my experience, once the market goes back up and stocks with high-growth potential — like the ones we own in Extreme Fortunes — begin to rise higher, people will always come back in to buy the stocks that they just previously sold. And at that point, investors end up paying much higher prices than what they sold their stock for at the bottom.

Unfortunately, there’s nothing that we can do about this level of volatility except ride it out.

I’ve been paying particular attention to Viveve because the stock is close to our stop-loss point, so should the company close at 30% or lower from our entry price, I’m going to send you an email with sell instructions.

While it always pains me to get rid of good stocks, if there’s one thing I’ve learned in all my years of investing, it’s that discipline should always trump conviction. While I believe that Viveve is an incredible company with plenty of room to grow, there’s no guarantee that the market makers won’t move the stock down another 30% before prices begin to rise again.

For this reason, we have to have the discipline to sell good companies if our stop-loss point is triggered. I’m hoping this doesn’t happen, but if that’s the case, then I will send you an email telling you to sell.

For now, though, hold tight and wait for further instruction.


Paul Mampilly
Editor, Extreme Fortunes