Friday(ish) File: NVIDIA, Teqnion and more…

We did have the internet, and cell phones... which were more mind-blowing in the 90s than AI is today, and more immediately economically important.The biggest fear many folks have is that the internet really was the critical driver for the economy starting in the late 90s... but the real economics of the maturing internet didn't show up until several years later, thanks in part to the fact that so many startups at the time lit so much money on fire in their enthusiasm about the potential.Should be an interesting couple years, but one constant of investing is that investors overreact to both the boom and the bust.

That's one way to manage a position, but it is inherently a decision to be a short-term trader of a stock like NVIDIA, not a longer-term owner -- NVDA would have triggered a 15% stop loss at least half a dozen times over the past five years, and would have triggered even a much more expansive stop loss level of 50% at least twice. Anyone who paid more than $135 a share before mid-2022, if they had a 15% stop loss on the position, would no longer own NVDA shares.Which is fine, some people swear by that as a way to limit the possibility of losing a lot more money, but unless you are someone who is willing to buy back in to positions after you've been stopped out (and that's a LOT harder than it seems, for most people, we tend to have a psychological block against it), it means you really can't be a long-term owner of very high-growth stocks. They will essentially all trigger any reasonable stop loss at some point, high growth almost always means high volatility and big swings in price from time to time.If you're worried about a collapse, then yes, a stop loss is a reasonable way to make sure you get out of the stock if it turns against you. You might not get your price if it's a big overnight move that triggers the stop loss, (if NVDA opens up 30% lower some day, for example, you won't get to sell at a 15% loss... but your broker will sell into the selling and you will sell at close to whatever the opening price is), but you will have drawn a line in the sand that will prevent you from second-guessing yourself if the shares fall to the point where you think you should sell.Certainly a personal choice, but one that folks who own these very volatile and extreme growth stocks should think about -- know why you own, and how committed you are to owning through cycles. If you believe that a stock is much too richly valued now, and you're taking too much risk by owning it, you can either make a determination to hold through whatever the cycles bring, or take some profits to reduce the potential risk of a future loss, or just set up some future rule, like a stop-loss order, that means you will sell when the price drops.Setting stop-loss levels can be very stock-specific and personal, but the current VQ% trailing stop for NVDA on the TradeSmith platform, just FYI, is about $460, an acknowledgement that NVIDIA's historical volatility makes moves of less than 40% pretty likely and not necessarily worthy of selling.

Do you mean just for the fourth quarter? Looks like the Renewal Royalty Fees growth rate did slow down for the fourth quarter -- it was growing at 46% for the first three quarters of the year, and only grew maybe 10% in the fourth quarter, so the full year growth rate was about 41%. I would imagine that was caused by some combination of the fact that growth in new business slowed in 2022, which would cycle through to lower growth in 2023 and beyond, all else being equal, and the disjointed nature of the insurance market late last year as prices really climbed dramatically in many areas, especially for homeowners insurance, and that probably drove a little more "price shopping" than is typically the case.Retention did gradually decline -- it was around 88% in mid-2022, and dropped to 87% a quarter ago and 86% as of the end of the year.It's a tough market right now for insurance buyers, so it wouldn't be surprising if things are more volatile than expected for a while, but given the big changes they've made in the business I'm not particularly worried about that quarterly shift. We'll find out if that's a trend over the coming few quarters, but the general tendency of this business to have improving margins over time (as they rely more on renewal commissions than on new customers) should help to offset the slowing growth.

I was not so worried about NVIDIA crashing by 30% on a quarterly update, not with so much attention on them, and any less dramatic put option was quite expensive given the surge in the share price this year.This was just to let off a little steam for me, taking a little profit on an extreme valuation... but like I said, I like NVIDIA and have owned it for a long time, but have also traded it poorly when I've tinkered around with my position. I would not be shocked to see NVIDIA at either $1,200 or $300 a year from now.