The WallStreetBets mania was nothing short of unprecedented. The big-league hedge funds selling short got squeezed out of their positions, and the targeted stocks that skyrocketed into the stratosphere (think BlackBerry) went bust just as quickly as they boomed. Many momentum chasers who showed up late to the speculative frenzy were left holding the bag, as shares crumbled like a paper bag in a mass rush to the hills.
By the time you hear for such short-squeezing pops in the mainstream financial media, it’s probably too late for you to profit off a speculative frenzy. While it’s tempting to follow the herd into a booming name, given all the stories of newly minted millionaires on Reddit’s WallStreetBets forum, one must take a step back and stand by their long-term investment strategies.
While you can get a quick euphoric rush by chasing the WSB’s latest short-squeeze target or speculating on which heavily shorted stock could be next to surge “to the moon,” investors must realize that by doing so, they’re not really investing; they’re gambling. Depending on the individual, such gambles may be justifiable. That said, we’re not about chasing quick profits here at the Motley Fool. We’re all about sound long-term investing — buying wonderful businesses and hanging onto them for the next three, five, or even 10 years.
Chasing short squeezes can be a risky proposition!
Distressed companies whose stocks have high levels of short interest may reek of “deep value,” but in many instances, “cheap” stocks are cheap for very good reasons. And inexperienced deep-value hunters who follow the siren song of low price-to-earnings (P/E) or price-to-sales (P/S) multiples may run the risk of walking right into a value trap. Deep-value investing isn’t everybody’s cup of tea. It requires a tonne of homework and can come with pretty hefty risks if it turns out a stock’s perceived margin of safety is nothing more than an illusion.
In this piece, we’ll have a look at one soaring Canadian stock that I view as a winner that’s likely to keep on winning in 2021 and beyond. Although the stock is up over 500% in a matter of months, I still think the name is far less risky than the ailing short-squeeze candidates trading on the TSX Index.
Consider paying up to be on the right side of secular trends with surging stocks like Docebo (TSX:DCBO)(NASDAQ:DCBO). Their valuations may seem absolutely ridiculous, but given the magnitude of pandemic tailwinds at their back and the likelihood of continued expectation-crushing growth in the post-pandemic world, I think each stock is not nearly as expensive as it seems.
Docebo: A 2020 winner that could keep on winning for years to come
Docebo is a Learning Management System (LMS) software developer that’s been riding high on pandemic tailwinds. I recommended DCBO stock numerous times through 2020, and if you’d bought shares on my advice, you likely bagged a multi-bagger. While the “steal” is gone, I still think the stock is worth buying after its latest dip into bear market territory, as the growth profile still looks as solid as ever.
Docebo is carving out a niche for itself, and I expect it to continue being a major mover on the TSX for many years to come. If you missed the rally last year, I’d seriously consider nibbling into a full position on weakness.
The stock currently sits down around 20% from its $82 peak hit in late December. If you’re of the belief that the work-from-anywhere trend will continue in the post-pandemic environment, DCBO is a must-buy before its next leg higher.
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Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends BlackBerry and BlackBerry.