Glossary
Bear Case
The written argument against a company, naming what would have to go wrong and what would show it was happening.
A bear case is the deliberate act of arguing against your own reasoning. It is not pessimism and it is not a conclusion about what anyone ought to do. It is the second half of a pair: the bull case says what has to go right, and this says what has to go wrong, written by the same person on the same day.
The raw material is easier to find than people expect. Every US public company publishes a risk factors section in its 10-K, written by the company's own lawyers, listing what could damage the business. It is deliberately comprehensive and deliberately unflattering, and it is free to read.
The value of having written one appears months later. A price falls, and the question becomes whether the cause was something already named in the bear case or something nobody had thought of. Those two situations feel identical in the moment and are not the same at all, and only the written version can tell them apart.
Learn this properly
Lesson 14: What Are Conviction Stocks?A conviction stock is a company you understand well enough that a bad week doesn't change your mind about it. Here's what that research looks like, and where conviction stops and stubbornness starts.
Related terms
- Bull CaseThe written argument for why a company will do well, stated as specific claims about the business rather than about the price.
- Bear MarketA fall of 20 percent or more from a recent high, across a whole market rather than a single stock.
- 10-KThe annual report a US public company files with the SEC, holding its audited financial statements and its own list of what could go wrong.
- VolatilityHow much a price moves around over a period, in either direction, measured as the size of the swings rather than the destination.
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