What to do when you've lost a lot of money on a stock; ServiceNow through my 'first look' lens; I just took back the family record in the half marathon
1) What should you do when you buy a stock and it declines significantly from the price at which you bought it?
This is one of the most difficult dilemmas you must overcome to be a successful investor. In my forthcoming book, The Rise and Fall of Kase Capital, I outline the three-step process to follow when you've lost a lot of money on a stock...
First, assume the market is right and you're wrong.
You must begin with this mindset because it helps overcome the natural bias we all have to not want to admit a mistake.
You must respect the market. The hard truth is that most of the time, it's right... and you're wrong.
Next, figure out what you've missed and actively seek out disconfirming information.
Redo your work, but don't just rehash what you already did. That won't lead to any new conclusions. Instead, you must ask – and honestly and correctly answer – a series of key questions...
Have you made a research error or missed any key information? Have you openly and carefully considered contrary arguments? Have you invented new reasons to own the stock (so-called "thesis drift")?
Take film company Eastman Kodak (KODK), for example. In the 1990s, it had one of the strongest brands in the world. It generated robust cash flows, and its stock traded at a low multiple of earnings. Sure, digital photography was a threat to Kodak's film business, but it seemed far off – and the company was making investments to compete in this space.
But its profits declined year after year, eventually disappearing entirely, and it filed for bankruptcy in January 2012. For most investors who lost money with Kodak, the mistake wasn't so much the initial purchase. Rather, it was the failure to recognize that the film industry was rapidly being obliterated and that Kodak was getting no traction in the digital arena.
The key is to tune out the noise, think clearly and rationally, and focus on the fundamentals. If the company's earnings rebound, its stock will likely follow suit. And if they don't, look out below!
Lastly, to make the right decision, pretend that you don't already own the stock.
It can be difficult and emotionally overwhelming to make the right decision about a stock you've lost money on.
On the one hand, you're probably telling yourself that if you liked it at the price you bought it, you should like it more now that it's cheaper. That may be true – but it could also be a value trap.
No matter what, you must resist the temptation to double down again and again to try to make back your losses. Remember the old saying... "You don't have to make it back the same way you lost it."
On the other hand, your emotions are likely telling you to sell so that you don't have to suffer any more pain and never have to think about this terrible stock ever again. You might also be tempted to wait until it gets back to the price you bought it before selling.
You must resist all these feelings! Emotions are deadly when it comes to investing...
I've found that it helps to pretend that I don't own the stock. I ask myself, "If I were 100% in cash today and building a portfolio from scratch, would I own this stock?"
If the answer is no, it would likely be wise to sell immediately. If the answer is yes, I would then ask myself, "What size position would it be?"
Doing nothing may be the best option. But you also must have the courage to admit a mistake and get out – or know that you haven't made a mistake and buy more.
If a stock is running against you, try following this simple three-step process.
2) The topic of losing money on a stock is on my mind because of what's happening with software maker ServiceNow (NOW)...
My team and I recommended the stock seven weeks ago in Stansberry's Investment Advisory, after it had been nearly cut in half in about a year. And it's down another 25% since then.
As you can see in the chart below, the stock had been a monster since its 2012 IPO. But it has lost 60% of its value in the past 15 months:
The stock tumbled 17.7% on Thursday alone after ServiceNow reported first-quarter earnings (earnings release here and investor presentation here).
Just looking at the stock, you might think that ServiceNow had reported terrible numbers. But that's not the case...
Revenues and earnings were in line with expectations, and the company raised full-year subscription revenue guidance. Management also said its backlog is strong:
As of March 31, 2026, current remaining performance obligations ("cRPO"), contract revenue that will be recognized as revenue in the next 12 months, was $12.64 billion, representing 22.5% year-over-year growth and 21% in constant currency.
CEO Bill McDermott commented on the company's strong customer retention, with a 97% renewal rate within the historical range. Demand and high renewal confidence for its Now Platform remains strong. And he continues to expect renewal rates to remain consistently high over time, as they have historically.
The company also took advantage of its much lower stock price by tripling its share repurchases this quarter relative to the previous two quarters:
So, why did the stock fall?
Subscription revenue growth was 0.75% lower due to the delayed closure of several deals in the Middle East (which will presumably close this quarter). It also reported there would be a small, temporary reduction in margins because of the recent acquisition of cybersecurity firm Armis:
While we will see some near-term headwinds to margins as we integrate the business this year, strong AI efficiencies internally from Now on Now and our underlying platform leverage are expected to normalize our operating and free cash flow margin expansion trajectories in 2027 and beyond.
Let's look at longer-term trends to see what an exceptional business ServiceNow is...
Revenue has risen steadily every quarter for the past seven years. And operating income, while a bit seasonal, has kept pace:
The business generates high and rising (albeit seasonal) free cash flow ("FCF"), with minimal capital expenditures ("capex"):
And the balance sheet is strong, with a healthy net cash position of $5.5 billion:
ServiceNow's historical financials and recent guidance don't explain the stock's massive sell-off. So what does?
Two words: "SaaSpocalypse" and valuation.
I'll cover this in tomorrow's daily, so stay tuned...
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.
P.P.S. Six weeks after running the New York City Half Marathon, I ran the Brooklyn Half Marathon yesterday. I improved my time by 4 minutes and 21 seconds – enough to recapture the family record. Here's the somewhat tongue-in-cheek e-mail I sent to friends and family yesterday:
This was the grim scene exactly six weeks ago – a day that will live in infamy:
My cheeky youngest daughter Katharine – who fails to respect her elders – took unfair advantage of her youth (she's 24 in a month) and six-day-a-week training to whomp me at the NYC Half Marathon with a time of 1:44:21 – 3 minutes ahead of my 1:47:18.
But was I going to let this travesty stand? HECK NO!
So I ramped up my training over the past month and a half and ran the NYCRUNS Brooklyn Half this morning with 28,040 others (but not Katharine). My expectations were low, as my legs have been quite sore and I've struggled to run even an 8:30 pace.
But as I started this morning, I cranked out the first 4 miles of the flat course in a steady pace of 7:33 to 7:39 – and I was feeling good! That got me thinking: "If I keep this up, I can beat Katharine's time and recapture the family record in the half marathon!" So that's what I did.
I slowed down to around an 8-minute pace from miles 7 through 11 thanks in part to some hills. But then I sprinted the last 2 miles up the big hill in Prospect Park and downhill to the finish.
My time was 1:42:57, good enough for 2,635th place overall (top 9.4%) and 12th out of 313 men in the 55-to-59 age group (top 3.8%).
Is Katharine going to take this sitting down? HECK NO! She just signed up for the NYRR Brooklyn Half Marathon on May 16 – less than three weeks from now. I won't be able to run because I'll be in Venice. (But we're both training for the NYC Marathon, which happens to be on my 60th birthday, November 1.)
GO KATHARINE!
