GM Reddit Mentions | ChartExchange

*(Note: I originally posted this on another board but Reddit suggested people on this board might find it interesting. I'm a creative writer who wrote a book on storytelling and now use what I learned about story to my stock analysis. This method, which I call "Narrative Investing" is still in development and the goal is to help analyze intangibles with some objective criteria. This is not about meme stocks, story stocks or trend following.)*
Now seems like a really good time to look at the term "Narrative" which is a word that could be used in a more productive way than it usually is.
A narrative is simply a story we tell ourselves about what will happen.
We can't process all the data of reality - sights, sounds, smells, memories, internal voices, actions of crowds, etc without constructing narratives, or stories, about what will happen.
Your teenage child is out an hour after curfew and has not texted. You're walking alone late at night and there's a tall shadowy fellow standing on the corner you need to turn down. Your unstable but brilliant brother in law wants you to invest in his all-nacho joint. You respond to these things by telling stories about what you think has happened or will happen. Then decide how to respond based on the story you tell about what will happen if you do A, B or C As biologist E.O. Wilson said your brain is a "narrative generating machine."
Two things investors do with story that I think are not ideally productive are 1) Separate the narrative from the numbers and 2) Overrate the value of numbers, ignoring intangibles that also fuel stories.
**1) Narrative and Numbers are NOT separate: the numbers are a crucial part** ***of*** **the narrative.**
Narratives are fueled by central dramatic questions, which are basically "Will the Hero do X?" Will the boy get the girl, cop get the killer, doctor cure the patient, etc. This is critically important. A great story is fueled by LOGIC. It ends in a way that logic dictates. The travesty at the end of Godfather II and miracle at the end of Rocky both work because you believe them based on the logic of what has happened.
When you look at how exhausted, spent, hated, betrayed, lost, conflicted Michael has become and look at his father, mother, older brother, rivals, wife/unborn child, culture, the state of the corrupt world, you believe he could do the unthinkable. When you look at how badly Rocky needs to go the distance and how distracted Apollo Creed is (and many other factors) you believe the ending could happen. If you believe in a story its core truth grows on you. If you don't you call "Bull (expletive)" and discard it.
In stocks, the hero of the story is the CEO and his band of brothers/sisters. But to keep it simple, let's focus on the CEO. We are asking basically, "Can X CEO do Y resulting in Z - meaningful stock price appreciation?" To accurately assess the odds of the CEO doing what he says he'll do you need to analyze the numbers. Can he sell x widgets? At what cost? What are the profit margins, etc.. *The numbers are an essential part* ***of*** *the narrative.*
When analysts use the term "story stock" what they mean is it's a bull dook story based entirely on things happening that have a low probability of success, not backed by numbers, logic or sometimes even basic sanity. Those who feel we're in a bubble use the metaphor of Wile E. Coyote running over the cliff. Then when he looks down, with only air beneath him he falls. The metaphor basically implies he has no math beneath him, no logic or physics. He has no reason to remain airborne.
The numbers are essential valuing the story. But that said...
**2) Numbers are only ONE part of the story. Unquantifiable intangibles are the other.**
As a narrative investor I can't help but laugh when "value" investors become enraged by valuations they find unrealistic. You can just see them slapping their own heads like Rain Man beneath a shrieking smoke detector because they are certain they know the Truth - truth backed up by numbers. Of course there are bubbles and times where stock prices get ludicrous beyond belief. And their rage is justified. That's not what I'm talking about here.
What I'm talking about are legitimately important intangibles - CEO intelligence, innovation, marketing, branding, alignment between the mission of the company and the times we live in, passion of the workers, unity of the team and straight up ability of the CEO to convince himself, his team, partners, buyers, analysts, retail investors, etc that he can do incredible things.
Imagine two identical companies - same factories, products, sales, margins, number of workers, etc. Make them as identical as you possibly can. Now put Jeff Bezos as CEO of one and our kookie nacho-loving brother-in-law in the other. Do you give them the same valuation? Do you know how well Bezos will execute? How many products he'll create to radically re-imagine nacho generation?
What I think is happening is in the age of social media, massive technological change, artificial intelligence, deep fakes, influencers, online retail investor communities, and declining faith in expertise and institutions - intangibles that fuel stock prices have become more important, or more intense, for longer periods of time.
I still think numbers are critically important - even would say the most important factor. But stock prices are set by human beings. And human beings make decisions VISCERALLY, emotionally, on a primal level *then* back in logic.
This is incredibly important. I can't find it now but once read about a study in which an audience watched films of people applying for jobs. After 1 second, 1 minute, 10 minutes, 20 minutes they were asked to say what they felt about the candidates. And the study found people rarely change their mind. They might not like the guy's face, hair, posture, clothes, or he might remind them of someone they love or hate. But when asked why they made their decision to hire him or not they will say very thoughtful logical things about resumes, knowledge, etc. They are never going to admit they just can't stand the guy's ugly mug.
**Conclusion**
The bottom line is in a market place people pay whatever they want to pay, for any reason they want to pay it. If you're focused exclusively on numbers you may value CrowdStrike one way. If you factor in George Kurtz's charisma, passion for racing, pinstripe suits, tough talk, the name "CrowdStrike," the icons of the "adversaries," the name Falcon, and how they handled a recent debacle you may be willing to pay much more. This has been called a "Narrative Premium." But really it should be called the "Intangible" premium.
To be honest I'm working out my thoughts as I write and I think what I'm realizing is **Numbers +** ***Intangibles*** **= Narrative.** There are intelligent narratives, or stock stories fueled by fantastic numbers and elite intangibles. And there are stock stories that are fueled by a gross imbalance of hype, dreams and lunatic conjecture.
I can't do math. I can only analyze intangibles. And the point is you can, with intuition, taste, judgement, emotional intelligence, a feel for cool factor, experience and a sense for the zeitgeist make reasonable assessments based on logical criteria. You can rank leadership, branding, past accomplishments on a 1-10. And we can all use the FEEL of message boards, YouTube, SubStack, CNBC, Seeking Alpha analysts, etc. to simply feel where things are at on a macro level and a stock specific level.
If you are watching the movie Braveheart and tasked with evaluating the odds of Sir William Wallace leading his renegades to victory you can't just count armor, horses, weaponry. You have to *guess* at the impact of the leader.
You ever notice how some companies come onto our collective radar with really good numbers. And no one gives a baboon's swinging arse about it. Crickets. While other companies spark people into near rioting. No one cares about Kulicke & Soffa. But put a group of Iren investors in a room with Nebius investors and a full blown West Side Story dancing knife fight might break out. Why? Intangibles stir people on these.
Bottom line II - I like bottoms - is we should want it all. Incredible numbers and fantastic intangibles. You feel this in sports. Your favorite team has a new GM, new coach, new captain, inspired players, healthy players, great mix of veterans and youth, and their stats are fantastic. Other years you know your team is in for abject misery.
Successful investing is about balance. Too much focus on numbers and you can miss tells about where the company is heading. Too much focus on intangibles and you're in fantasyland. I just had Claude analyze my investments since 2020. My worst one, by far, was Lemonade. I fell for a story without doing the critical work of stealing analysis from guys like Bear, Stock Novice and people who can do analysis. I was imbalance and got lit up.
So if you think your company will find gold on Uranus, and the valuation already assumes it will happen you may be delusional. But likewise, if you think your company should be X price but it never moves the way you insist it should, you are likely missing intangible factors others values higher than you do. Numerical arrogance can be just as damaging ot your returns as hero worship.
We can't control our outcomes but we can control the quality of our decisions. We only ever regret being careless and reckless. An intelligent decision that simply doesn't go your way is no crime. I'm incredibly grateful to WPR and Bear for creating this board to help us make the best decisions we can, especially when it's hard to know what's really going on. We all add the most value when our posts are fueled by the unique game we each play. Mine is Narrative Investing. I hope this post inspires you to define your style. With volatility likely to increase this will be critical to success.
Broadway Dan

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