Much like in science, your investment thesis needs to be falsifiable. It needs to be falsifiable so that you can know what kind of facts might lead you to change your opinion. It needs to be falsifiable, from a valuation ground, so that there's anything like "cheap" or "expensive".
It thus helps that when one states one's opinion regarding any asset, there's already a set of facts which would, if they produce themselves, readily and quickly falsify the thesis. This is not a failure of the thesis, but instead, it's a crucial part of a valid thesis.
Take for instance my recent article on natural gas (NYSEARCA:UNG). I stated my thesis, which rested mainly on there being emerging signs of a reduction in natural gas supply. This observation made me turn short-term positive on natural gas. Yet, on that same day, hours later, EIA published its Natural Gas Weekly Update, where we can observe weekly supply statistics. And this is what we saw (red emphasis mine):
These are facts, and these facts contradicted my original reason for being short-term positive, which was based on supply heading down. The thesis was falsifiable and got falsified right there. Hence, I did the right thing, which was to turn neutral again.
So even though there are times when one's thesis remains true and the market still takes us to the woodshed, like it happened to me on Amazon.com (NASDAQ:AMZN), this principle of relying on a falsifiable thesis is the only thing which can keeps us from falling prey to the clutches of confirmation bias and other such behavioral pitfalls.
Build a thesis which requires facts that confirm or deny the thesis. Then keep an ear to the ground to hear those facts arrive. Check each incoming fact and see if it confirms or falsifies your thesis. If the facts directly falsify your thesis, change opinion.
I was not flip-flopping on natural gas, I simply turned neutral again because the incoming facts falsified my original thesis. If supply had kept on going down as in the previous few weeks, I'd have remained positive for its prospects.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.