Tag Archives: herd mentality

Don’t Get Swept Away

Sometimes when it feels like you are swimming against the waters flow and will be swept downstream at any moment, don’t forget you are in control and making it to the other side is your choice.

It is often easier to just go along with others.  In many cases, this is the best approach, least stressful, and it can be fully satisfying.   However, that is not always true.

Most importantly following the crowd or going with the flow should be a conscious choice.  Do it because you want to not because others want you to.

Sheep Mentality

Sheep are often used to describe the follower mentality.  This animal species is well known for traveling in a pack.  The rare sheep that does not stay with the herd is labeled the black sheep (to highlight that they are different and perhaps not in a positive way).

Being part of a group can be the best approach for you but it should not be the default selection.  The group should not decide for you unless you want them to.

Social Animals

Humans are correctly classified as social animals and numerous psychology studies have demonstrated our need for positive interaction with others to maintain our mental health.

This does not mean you cannot swim upstream against the flow if that is the best thing for you.  However, it does require initiative and determination both of which are usually considered to be positive traits, within circumstantial constraints.

Unfortunately open but respectful independence should be a right but depending on your geographic location this is not always the case.

Notwithstanding the challenges, if you choose to take a different path because it is right for you, I applaud you.

Fear of Missing Out

Human behaviour is most interesting for me when considering group think, basically crowd or herd mentality.

Many of you will be following the top equity market story of the last couple of months – marijuana companies.  The demand for these  stocks has no logical or rational analysis behind it that I can figure out.

Me too

Personally I believe this is a perfect example of the fear of being left out.   Based on the demand, unsupported by more than a quess at what sales volume the marijuana market  represents, thousands are acting out their me-too impulse.

Basically if we don’t buy now at whatever price we might miss out.  Lets get in before it’s too late.  News flash, it’s too late.  It was probably too late when the price for Canopy (the biggest Canadian marijuana producer) broke $8 a share.

Looking at basic indicators like sales, forecast sales, forecast earnings per share, net asset value, market cap, management track record and so on a solid case could be made to buy Canopy at $7 to $8 per share.  Beyond that, not so much and $42 per share, forget it.

(Full disclosure I bought at a little over $7 share).

Probabilities

Based on a very conservative guess at the size of the Canadian marijuana market, Canopy’s share of this market ( considering manufacturing capacity and current sales) it is highly likely they will be able to pay a 5 to7% dividend (based on a $7 share price) within 3 years (assuming they don’t retain a lot of capital to keep growing).

My estimation though is at $42 per share the dividend would be less than 1% at most and the only way you would get good value is if the sales grow rapidly along with demand for the shares.  A very big if for me.

So I conclude, the sheep mentality is in place and emotions, not logic or analysis are driving demand.