🦉 Learning to pick stocks

Investing in the stock market can be a wild ride—especially when we start investing for the first time. It’s not just about numbers; it’s about navigating dreams, fears, and ignorance haha.

Let me take you back to a pivotal moment in my investing journey: a late-night conversation with my buddy Diego, who decided to gamble his entire yearly bonus on a chicken chain stock. Yes, a chicken chain.

As he passionately pitched his “surefire” investment, I felt a mix of excitement and dread.

Little did my friends and I know this would become one of those legendary stories we’d laugh about for years—if only to mask the sting of lost money.

How we learn stock picking

A group of four of us from high school have kept a pretty active WhatsApp chat going for over ten years now, since our college days. Despite living far apart, it’s kept us close.

Along with the day-to-day chat, we've also had surprising amount of real discussions about life's tough moments, family, relationships, politics, and of course money and investing.

One of the great things about our WhatsApp chat is its role as a time capsule.

We can revisit and laugh at all the stupid decisions, wild predictions, and terrible opinions we once held - word for word.

One of my favorite moments from our early stock market investment talks back in 2015 went something like this:

I swear am not making this up. NASDAQ:LOCO!

Believe it or not, this is one of the smartest and well-read friends I know. Even though he just put his investment banking analyst bonus into stock from a company called El Pollo Loco 🐔 

I can imagine some of you are thinking I need to get smarter friends…

“Cash on cash” LMAO 🤣 

At the time, his pitch seemed impressive, and I even felt embarrassed for not understanding all the concepts and metrics he was mentioning.

Not gonna lie. I was tempted to buy.

FOMO for LOCO.

Luckily, trades back then required more effort than today.

Now, apps like Robinhood have made investing as easy as sending a WhatsApp message. I don’t want to know what we would have done ten years ago with today’s tools…

Diego's excitement was palpable. "Guys, this is it!" he texted us later one night. "I’m sure LOCO is gonna be the next Chipotle. I can feel it in my bones!"

His enthusiasm was infectious, and I found myself staying up late, researching chicken restaurant stocks and dreaming of quick riches.

As the days went by, Diego's messages became more frequent and more intense. "Every time I pass a Pollo Loco, I see dollar signs," he joked.

But beneath the humor, we could all sense the nervous energy. He had a lot riding on this bet.

Diego had us convinced the stock would surge with an upcoming quarterly earnings release in a few weeks' time...

And finally, the day arrived.

But instead the quarterly results were bad. The stock, which had already been falling in the previous months. Continued going down. Hard.

That day, our WhatsApp chat fell silent. We all knew Diego was hurting, but none of us knew quite what to say.

Finally, breaking the tension, Diego sent a gif of a cartoon chicken falling off a cliff. It was his way of letting us know he was okay—bruised, but not broken. More like fried chicken 🍗 

But the damage was done.

One quality I will always admire of Diego: he’s has the amazing ability of being able to laugh at himself in the middle of adversity. I would have just been pissed.

Another is his honesty with us. He was dreaming up an all-out Las Vegas fest with the ton of money he was going to make off this trade and had no qualms about admitting it, haha.

Pure greed and splurge.

“I still stand by my analysis” 😆 

In the weeks that followed, our chat became a support group of sorts.

We shared articles on investment strategies, debated the merits of index funds versus stock picking, and even had a "worst investment story" contest.

Myself and Jacob had a competing story that probably took the prize! But that’s a story for another day my friends.

One evening, after a few beers, Diego opened up about the emotional toll of his LOCO adventure. "You know what sucks the most?" he typed. "It's not just the money. It's feeling like I should have known better.

Like I let myself get carried away by the hype. That vulnerability sparked a deeper conversation about our fears and aspirations as young investors.

We realized we were all struggling with the same things: the pressure to get rich quick, the fear of missing out, and the nagging feeling that everyone else had it figured out.

Takeaways

It's amazing how similar human behavior is.

Common sense. That goes out the window quickly.

I’ve seen the LOCO play out many times since then—having done it myself, watching other people I know, and observing it on social media.

Speculative Gamble Play by Play

• Making a dumb trade

• Following your gut

• Oversize the trade by going “all-in”

• Getting your ass kicked by the market

• Grasping at analyst research targets, or any other confirmatory data point

• Saying your gonna ‘hold long-term’ - because your not willing to cut losses

Looking back, Diego's LOCO fiasco was a turning point for our little investing club. It taught us the importance of diversification, the dangers of overconfidence, and the value of having friends who'll stick by you when your "sure thing" goes south.

These days, our WhatsApp chat is still buzzing with investment talk, but it's different.

We're more thoughtful, more measured. We celebrate small wins and learn from our losses together. And every now and then, when one of us gets a little too excited about a stock or some half cooked idea, someone will inevitably chime in with, "Remember LOCO!"

It's become our shorthand for "slow down, think it through, and maybe don't bet the farm on some chicken."

Scratch the Itch

Lastly, today I am a big fan of passive index-based investing, especially for equities.

But I also know that a lot of data, studies, and being told what to do are not going to stop people from trying to pick individual stocks.

We all wanna pick the next NVDA or small cap that’s gonna explode.

What can we do about it? Only use a small % of your portfolio to pick stocks.

And make sure to be honest with myself no matter what happens. What’s the thesis, time frame, expected return? —we all need some accountability so we don’t lie (too much) to ourselves later.

None of this “I stand still stand by analysis” after you got whacked like a LOCO.

If you lose the money, you’ll still be fine and your financial plan will still be intact.

Looking back at these stories my friends and I all have a blast. We’re lucky we made these mistakes back then - with smaller amounts of money. And not today, when more is on the line.

I hope you enjoyed this piece and laughed a little along the way.

I’m sure we all have friends that have pulled some LOCOs in their day. Share this story to remind them of those days.

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