Was I right for the right reason?
Just a quick thought.
Something that is kind of a mind(expletive) with investing is you could be right but it is very hard to tell if you were right for the right reason, at least with a trade.
Sometimes you make a bet on a stock, and then surprise news comes out and you make a ton of money. You were right about the stock, but your thesis was probably incorrect and you got lucky...so will you be right again?
Sometimes it is hard when there is NO news. Like a few weeks back when the ESRX and MHS deal fell through, I told my mom and a friend to buy a ton of MHS. The stock dropped big, to like $60. I know MHS is a good company. My thesis for the trade was, if ESRX is trying to buy them out for about $75 a share, and they know more about PBM value than pretty much anybody else on the planet, the market price is wrong. $75 is an overshoot because buyouts are always expensive, and the company is worth more to ESRX due to synergy than to an average investor. But even with that factored in, ESRX must think the stock itself is worth at least $67.
So, they did nothing, and ESRX rose to $68 within a week or 2. So you could have made about 13% in 2 weeks, which is a fantastic gain. However, how do I know if my thesis was right, and it wasnt just general bullishness of the market that lead the stock up high? I will never know. These plays tend to be my favorite kind though.
The one I am wondering about the most though is UEC. I picked it on caps when the chart looked like it was bottoming, and CCJ said that long term nothing would really change for Uranium. That was my entry, but my thesis was that, and actually at this point I cant even remember the name or term of the deal, but uranium should go up a lot after 2013. This is because a lot of current uranium is scrapped from old nuclear weapons. That program is set to expire in 2013. After that, my thoguht was uranium miners would have to ramp up production, which was bullish. I don't know much about the energy sector. Hell, when I picked the stock, I barely even knew how nuclear power worked. I spent about 4 hours reading about how it worked, and why people preferred it over other types of energy. In about 8 months, my pick outperformed the market by 25%. That is huge for 8 months! But was my thesis right...is it starting to be priced in? Or was the stock just really cheap, or was the economic upturn lifting energy fast, or did it have to do with oil and gas? I won't really know, so I barely learned from it.
Anybody else ever think about this? This applies more to trading than investing, but in reality it applies to both.