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Why I won’t buy a “good stock” like GetSwift Ltd again

horse racing

Unless you’ve been ‘off grid’ with tin foil wrapped around your cranium you would know that GetSwift Ltd (ASX: GSW) shares could go on to be massive winners.

Here are some recent headlines:

“Pivotal Announcement Steepens Trajectory For GetSwift”

“GetSwift Ltd shares rocket on game-changing deal”

“Young Rich 2017: Joel Macdonald, the $100m ex-footballer behind GetSwift”

GetSwift is a smallish ASX-listed logistics business that saves companies precious time on their delivery routes. It’s often the ‘last mile’ of delivery that’s most challenging for logistics businesses and e-commerce companies.

So GetSwift sounds like a great idea.

And with so much press behind GetSwift, its shares haven’t disappointed.

Source: Google Finance

More press, more money, less problems

I think the $380 million company could be a good one for investors over time, once it starts generating meaningful revenue.

Although, take that with a grain of salt because I said the same about Reffind Ltd (ASX: RFN) before the company’s shares fell 98%.

The differences between “shares”, “stocks” and businesses

The words “stock” and “share” probably come from some latin word I can’t pronounce. But fundamentally they mean that you have ‘part’ ownership (that’s why it is a ‘share’) of the equity in a business. Just like a couple that has a ‘share’ of the equity in a home.

Yet, some financial analysts and all traders have taken ‘a share’ to mean something else entirely.

“Good” stock. “Bad” stock. 

To them, a “share” is an instrument for speculation. The same way you would speculate on the price of gold, Bitcoin or emu eggs – people often speculate on “a share”.

There is no such thing as a “good” share or a “bad” share, they are just shares.

It’s also vital for investors to know the difference between a “business market” and a “share market”. If you focus on the ‘share’ and forget the business you are going to slip into a short-term mindset — something which can be very hazardous to your wealth.

The endless search for rationality

People gamble all the time. Horses, ‘the dogs’, keno, pokies, stocks, the name of Princess Stacey’s sister’s brother-in-law’s second child. You name it, you can speculate on it.

Note: “speculation” is a word made up by a (bald) middle-aged finance dude that means “gamble”. We respond better to labels when we do things that don’t fit with the status quo.

Unfortunately, as my colleague Claude Walker knows too well, although it may not be a smart idea to “speculate” on “good stocks”, the search for rationality in financial markets is endless.

What’s this got to do with GetSwift?

It has been said by the company and its supporters that GetSwift has a novel idea and technology. But as investors, we have to carry our scepticism with us at all times. Without any material cash flows, as it stands, GetSwift is purely in the realm of speculation.

I’m very happy to be proven wrong in two or three years from now (and very well could be) but if my scepticism saves even one person from losing their life savings on the whim of a marketing team, it was worth the risk of looking like a (lower-case-f) fool.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

Motley Fool contributor Owen Raszkiewicz has no position in any of the stocks mentioned. Follow Owen on Twitter @OwenRask.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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