Podcast Summary
Investment risks: Unexpected events can cause significant drops in the value of even the most reliable investments, emphasizing the importance of staying informed and prepared.
Even the most reliable and highly-regarded investments can come with risks. In this episode of the Stocks and Savings Podcast, the hosts discussed the unexpected impact on their portfolio when a software update from cybersecurity company CrowdStrike caused widespread outages around the world. Although they have consistently praised CrowdStrike and held it as a significant investment, the unexpected incident led to a 14% drop in the company's shares, prompting the hosts to sell 20% of their holdings. This event serves as a reminder that no investment is completely risk-free and that unexpected events can significantly impact even the most well-researched investment decisions. Additionally, it highlights the importance of staying informed about the companies in your portfolio and being prepared to adapt your investment strategy as needed.
IT outage risks, multiple solutions: Relying on one vendor for IT security comes with risks. Companies should consider multiple solutions and contingencies to minimize potential negative impacts.
While CrowdStrike is still a leading cybersecurity company, the recent IT outage caused by a software update resulted in significant negative press, customer impact, and potential changes in business deals. This incident emphasizes the risks of relying on one vendor for IT security and the importance of companies considering multiple solutions and contingencies. CrowdStrike's response, including an apology and explanation, was seen as a positive step by some investors, but others questioned the decision to sell shares following the news. Ultimately, the long-term impact on CrowdStrike's business remains to be seen. The incident serves as a reminder that while companies may have strong track records, unexpected events can have significant consequences. Investors should focus on the company's performance and long-term prospects, rather than short-term market noise.
Relying too heavily on single service provider: Relying too heavily on a single service provider in tech industry can lead to uncertainty, reputational damage, potential lawsuits, and loss of customer trust. Diversification and risk management are crucial for business operations.
Companies, including CrowdStrike, can face significant uncertainty and potential reputational damage when they rely too heavily on a single service provider, especially in the tech industry. The incident with CrowdStrike and its AWS outage serves as a reminder that having multiple cloud providers and a central cybersecurity provider can help mitigate risks. However, managing multiple providers can be complex, and the potential fallout from reputational damage and loss of trust is currently unknown. This uncertainty could lead to customers scrutinizing their relationships with CrowdStrike, potentially resulting in reduced usage, switching to competitors, or delaying new service additions. Additionally, potential lawsuits and penalties are also a possibility, adding to the uncertainty. Overall, this incident highlights the importance of diversification and risk management in business operations.
CrowdStrike uncertainty: Despite strong performance, uncertainty from IT systems outage and large stock holding led to cautious approach and reduction of CrowdStrike holdings.
Despite CrowdStrike being a top-performing investment for us this year, we decided to trim our holdings due to the uncertainty caused by a major IT systems outage and the company becoming our largest individual stock holding. While we still hold 80% of our initial shares, the significant impact of CrowdStrike on our portfolios necessitated a more cautious approach. We cannot predict the size of the potential "bump in the road" this incident may cause, and we want to minimize risk to our overall investment performance. We will closely monitor the situation and assess the impact on the company's quarterly results in August.
Individual stock risks: Investing in individual stocks involves inherent risks, and even high-performing stocks like CrowdStrike can experience significant setbacks. Regular monitoring, patience, and diversification are key to managing these risks.
Investing in individual stocks comes with inherent risks, and even a highly performing stock like CrowdStrike can experience significant setbacks. Despite selling 20% of our holdings in CrowdStrike due to a software update issue, the company remains a significant investment for us. We still have faith in the long-term thesis for the business but acknowledge that the rest of the year may bring uncertainty and potential losses. The incident serves as a reminder to update beliefs based on new information and to be prepared for the emotional rollercoaster that comes with individual stock investing. The upcoming announcement of CrowdStrike's results at the end of August will provide more clarity on the situation. While individual stock investing can be rewarding, it requires regular monitoring and patience during challenging times. Additionally, diversifying investments through index funds can help mitigate some of the risks associated with individual stocks.
CrowdStrike long-term investment: Despite short-term challenges due to a recent outage, CrowdStrike's long-term investment potential remains strong due to its industry-leading cybersecurity solutions
Despite the reputational damage CrowdStrike experienced due to a recent outage, the long-term investment potential in the company remains. This is because CrowdStrike continues to offer the best cybersecurity solutions in the industry. However, the near term may bring challenges, including increased scrutiny and potential customer losses. Investment banks have given mixed reactions to the situation, but overall, the consensus is that CrowdStrike will face hurdles in the coming months. The company's upcoming results at the end of August will provide more clarity on the financial impact of the breach. Despite the short-term pain, the long-term story for CrowdStrike remains strong, making it a top holding for many investors.
CrowdStrike uncertainty: Speakers hesitant to buy CrowdStrike shares due to uncertainty surrounding business for the remainder of the year, believe risks outweigh rewards, waiting for next set of results, market dislikes periods of limbo may negatively impact share price, maintain positive outlook, open to buying opportunities in next 12 months
The speakers are currently holding off on buying more CrowdStrike shares due to the uncertainty surrounding the business for the remainder of the year. They believe the risks outweigh the rewards at the current share price and are waiting for the company to report its next set of results at the end of August before making any further moves. The speakers also mentioned that the stock market generally dislikes periods of limbo, which may negatively impact the share price in the short term. Despite this, they still maintain a positive outlook on CrowdStrike's future and are open to buying opportunities in the next 12 months. Overall, the uncertainty surrounding CrowdStrike's business for the remainder of the year is causing the speakers to exercise caution and adopt a wait-and-see approach.