Saw this from last weeks Juback article at MS investor
Jubak's Journal
Why 'buying on the dip' can be a dumb idea
Buying a stock just because the price drops is a dim-witted strategy, unless the risk factors go down as well. That's why I'm buying Vitesse on a dip, but not IBM.
By Jim Jubak
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My second requirement to become a modified "buy on the dip" candidate is that the risk in the stock -- the odds that it won't deliver the potential profit I've calculated -- must have decreased since I last reviewed the situation, which in the case of this Future 50 portfolio was a month ago.
That can happen in two ways. First, the risk in the stock can decrease because the price of the stock has fallen while the company's prospects have improved, or at least stayed the same. Second, the risk can decline because, while the stock's price hasn't fallen appreciably, the company's fundamentals have improved significantly. I've got five buys to award to Future 50 stocks for each combination.
Group 1. Lower prices with improving fundamentals means lower risk -- and buy ratings -- for these five stocks: Vitesse Semiconductor (VTSS), Broadcom (BRCM), RF Micro Devices (RFMD), Texas Instruments (TXN) and Wind River Systems (WIND).
This combination may sound strikingly similar to a "buy on the dip" strategy, and often a dip in price will alert me to potential buy candidates. But there is one crucial difference between standard "buy on the dip" and my approach. While the price decline may bring me to a stock, the reason for buying the stock is that the company's fundamental story convinces me that it will be worth significantly more in the future than it is now.
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