Key insights
- The author questions why investors often chase high-risk, high-reward "underdog" stocks instead of investing in proven winners like Google, Amazon, and Nvidia, even when the latter offer substantial, albeit lower, potential returns. The post suggests a psychological bias, possibly "Favorite Longshot Bias", influences investment decisions, favoring riskier bets over more predictable growth opportunities in established tech giants. This could lead to missed opportunities in large-cap tech.
Is it just anchoring bias?
After the latest earnings, the outlook is clearer than ever for $GOOGL. The existential threat to the Search business didn't pan out the way the bears warned. They are getting massive traction in many bets and investments. It looks like it is on a clear path to becoming the first $10 Trillion company by 2030, or maybe even sooner.
I know so many people who genuinely believe this $10 Trillion thesis. That implies a roughly 1x (100%) upside from where we are right now. But they still refuse to pull the trigger. They are still looking for discounts, better risk/reward ratios, and underdogs not priced in by the market
And it’s not just $GOOGL. Many other companies have disproportionate advantage in AI trade in next few years.
Why is it so hard to invest in proven winners?
Edit:
As one commenter pointed out, this is a well known phenomenon called Favorite Longshot Bias