Tis the season to be jolly, thankful — and disciplined. And where better to get some timely tips on investing in stocks than the holiday classics “Rudolph the Red-Nosed Reindeer,” “Frosty the Snowman” and “A Christmas Carol,” featuring the reformed curmudgeon Scrooge.
Using Nvidia (NVDA), Tesla (TSLA), Meta Platforms (FB) and Netflix (NFLX), and IPO Leaders like Klaviyo (KVYO) as examples, we’ll reveal a few of the secrets to stock market success hidden within these beloved holiday specials.
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Rudolph The Red-Nosed Reindeer On Investing In Stocks
We all know it’s Rudolph’s unique red nose that makes him the “most famous reindeer of all.”
It’s the same for the best stocks to watch. As one of the key pillars of The IBD Investing Methodology, top growth stocks have a product or service that is unique, innovative and in demand. It’s these attributes that ultimately drive the big earnings and sales growth that attracts the buying power of institutional investors.
Think about what drove the powerful moves of Nvidia stock, Tesla, Netflix and Meta over the years. Each company has been a game-changing innovator.
Nvidia’s chip technology has been at the cutting edge of computer graphics, artificial intelligence and the self-driving car revolution. Those groundbreaking innovations have fueled explosive growth, which continues to push Nvidia stock to record highs. A bullish report on the AI juggernaut and other AI chipmakers just gave it another boost.
Netflix has gone through multiple industry-changing innovations since its founding in 1997. From delivering DVDs with no late fees to pioneering online streaming to becoming a major creator of original content, Netflix has continued to develop new businesses.
Meta-owned Facebook, of course, remains at the forefront of the social media revolution it helped pioneer. And as the world moved from desktop to mobile in the early 2010s, CEO Mark Zuckerberg and team found their mobile mojo to avoid being left behind before evolving into a major AI stock.
Back to trading near its all-time high, Tesla also continues its pioneering spirit. From spearheading the mainstream emergence of electric vehicles to pushing robotaxis and Full Self-Driving technology, the company continues to innovate.
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Frosty the Snowman On Stock Investing And Market Cycles
Frosty teaches us how the market and individual stocks move in cycles. America’s favorite snowman melts each year, but always returns the following winter.
It’s the same with the stock market. After every market “meltdown,” a new bullish uptrend eventually emerges. That’s an important point to remember in times of sharp market volatility. The coronavirus crash and subsequent rebound reminded all investors of that fact. So did the sharp drop in tech stocks like Nvidia, Meta and other Magnificent Seven stocks in 2022, followed by a robust bull market.
Massive moves in Nvidia, Meta and Netflix only reinforce that point. Although it took longer to emerge from its slump, Tesla has also regained traction.
But keep these two important facts in mind.
Most leading stocks in the prior bull market do not come back to lead in the next one. In fact, only about one in eight past leaders returns to lead again. So when a new bull market begins, be on the lookout for a new crop of leading stocks.
When a bear market hits, former leading stocks decline 72% on average. So understand the dangers of a “buy and hold” strategy, and be sure to lock in your profits and cut short any losses when the market rolls over.
Frosty the Snowman also teaches us about the importance of institutional sponsorship.
In the classic TV show, it’s the magic black hat that brings Frosty to life. In the stock market, the magic hat is the buying power of mutual fund managers and other large institutional investors. They provide the fuel that pushes a stock higher. Without that support from the institutions, a stock is unlikely to make a big, sustained upward move.
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Scrooge On The Importance Of Post-Analysis
The famously stingy and grumpy Scrooge teaches us about the importance of reflection — and that we all deserve a second chance.
By the end of “The Christmas Carol,” Scrooge has transformed from “Bah humbug” to “Merry Christmas! God bless us, every one!” How did he make that transformation? By doing a post-analysis of his life.
All investors make mistakes, but not all investors learn from them. That’s the difference. To make sure you learn from your mistakes (and your successes), do a regular post-analysis of your trades. It’s a profitable use of your time, and much more pleasant than being visited by ghosts in the middle of the night.
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