Dear Financial Voice Reader,
A common investing mistake people make is highlighted by a client question I received. The answer is below and you can work out the question and problem he had from the answer:
I’m going to answer this very directly, because this is the same question in a different wrapper, and it’s exactly where you keep tripping yourself up.
SanDisk (via Western Digital exposure) is not the question you should be asking.
The question you keep asking is:
“Is this stock interesting right now because it has tailwinds?”
That is a momentum-chasing question, not an investing question.
Here’s the straight answer, then the framework you need to stick to.
First, on SanDisk / memory / tailwinds.
Yes:
- memory demand has cyclical tailwinds,
- AI and data centres increase storage needs,
- sentiment has turned from awful to optimistic.
But:
- memory is one of the most brutally cyclical industries in markets,
- pricing power comes and goes fast,
- returns are dominated by cycle timing, not quality,
- and these stocks regularly fall 50–70% even when the long-term story is “intact”.
That means this is not a Quality 5-style compounder.
It is a cycle trade.
So asking “overvalued or interesting?” is the wrong framing.
The correct framing is:
“Do I want to run a cyclical memory trade right now, knowing I could be wrong for months and take a big drawdown?”
If the answer isn’t an immediate and comfortable “yes”, then the answer is no trade.
Second, why this keeps happening with you.
Every time:
- a stock has tailwinds,
- sentiment turns,
- price moves up,
you ask whether you should rotate into it from something boring and high quality.
That’s exactly how people end up with lots of clever entries and poor long-term results.
You already own:
- the AI beneficiaries,
- the platform companies,
- the quality infrastructure names.
You do not need to chase second-order beneficiaries every time a narrative gets exciting.
Third, where this would fit (if at all).
If you insist on touching this type of stock, it belongs:
- in a small, clearly labelled cyclical / tactical sleeve,
- sized so that a 40–50% drawdown does not bother you,
- with an exit rule defined before you buy.
It does not belong:
- as a replacement for core holdings,
- as a long-term “hold and forget”,
- or as something you keep revisiting every time momentum appears.
Fourth, the rule you need to remember.
If a stock is only interesting because of current tailwinds, it is already late-cycle.
Quality investing asks:
“Will I be happy owning this through a full cycle?”
Cycle trading asks:
“Can I time this well enough to get out?”
Be honest about which game you’re playing before you click buy.
Final answer, very simply.
- Is SanDisk interesting as a cycle trade? Possibly.
- Is it overvalued? That’s irrelevant for a cyclical memory stock.
- Does it belong in your core portfolio? No.
- Should you rotate out of quality to chase it? Absolutely not.
If you want to do something useful instead:
- stick to the portfolio model,
- stop asking single-stock “is it interesting?” questions,
- and only add trades when they fit a predefined sleeve with rules.
Otherwise you’ll keep running in circles, just with different stock names each time.
Best,
Alpesh
