The Valuation : Value Investing Through Valuation

The stock market is often seen as a realm of numbers, ratios, and logic. But behind every price movement is a much more primal force: human psychology.

Understanding how emotions shape investment decisions is just as crucial—if not more—than analyzing companies or charts. Why? Because markets are not moved by balance sheets alone—they’re driven by people. And people are emotional.

Let’s break down what this means for everyday investors using a very real and recent example:

If You Bought Palantir and Sold Tesla This Summer…

You’re not alone. In fact, this is one of the most common behavioral traps investors fall into.

In the summer of 2025, Palantir (PLTR) was trading near its recent highs after an explosive AI-fueled rally. Tesla (TSLA), on the other hand, was recovering from a pullback and had yet to regain momentum.

So what did many investors do?

They chased the “hot stock” (Palantir) hoping the rally would continue…

And they cut their losses in Tesla, afraid it would keep falling.

But the logic behind these moves isn’t based on valuation or long-term fundamentals.

It’s based on emotional comfort.

“If it’s going up, it must be a good investment.”

“If it’s going down, I better get out.”

The Cycle of Emotional Investing

This behavior isn’t rare. In fact, it’s predictable.

Humans are wired to avoid uncertainty and seek what feels safe or familiar. So we gravitate toward stocks that are rising and shy away from those in decline.

But here’s the hard truth:

The best investments are rarely the ones that feel safe.

When everyone loves a stock, it’s often overpriced.

When everyone ignores or fears a stock, that’s when it tends to be undervalued.

This is why contrarian investing works—because it resists emotional consensus.

The Key Is Not to Eliminate Emotion, But to Recognize It

Good investors don’t deny their humanity. They just build routines to manage it.

They don’t impulsively chase headlines. They revisit stocks that feel uncomfortable. They resist the urge to follow the crowd.

It’s not about being fearless. It’s about being self-aware.

Ask Yourself:

Am I buying because I see value, or because everyone else is buying? Am I selling because the business has changed, or just because the price dropped? What would I do differently if I were making this decision a week from now, with a clearer head?

The Market Rewards the Rational, Not the Reactive

Successful investing isn’t about knowing more than others.

It’s about behaving better than others.

So next time you’re tempted to buy what’s hot and sell what’s not, pause.

You might just be reacting like a human—and that’s okay.

Just don’t let it cost you money.