Since January, yes, I've been doing a lot of trading, when I abandoned LTB&H. When I become convinced the economy is going to avoid both recession and inflation, I'll go back to LTB&H. Yes, I know it's a contradiction to say, "I'm a LTB&H investor mostly, but not this year".
Yes, I like the communications chip companies, but I don't have the time to follow a lot of companies, so I tend to buy pick the biggest (and best?). One of these days (years?), I'm going to get around to doing DD on ALTR and XLNX.
RE: "Longer term though I believe most traders have lost out to the buy and hold camp". During extended periods, LTB&H has not worked: for a generation after the 1925-1929 bull market, and again after the 1960s bull market peaked. Are we headed for another of those 20-year periods when LTB&H doesn't work? I don't know, but it is a possibility.
If 3G ever gets off the ground, QCOM is positioned better than Nokia. Nokia makes small, pretty boxes. QCOM owns the patents everyone has to use. However, I've used the same reasoning to not buy Dell, and I've been wrong about Dell for a very long time. I keep on waiting for the boxmakers to go the way of the disc-drive makers, and it keeps on not happening.
EMC has been attacked for many years, as everyone lusts after their growth and margins. NTAP might succeed, or a company that hasn't been founded yet (using a technology that hasn't been invented yet). The others won't, I'm fairly certain, based on their past track records.
How have I resisted buying a stock (JDSU) when I like the company? I don't have to own anything. I either get my price or I don't buy, and I'm willing to miss an opportunity, because I find there are always other opportunities out there, sooner or later. And I'm willing to be patient, waiting years if need be. Since late 1998 (and still, today), I've thought that most investors were either ignoring valuation levels altogether, or using absurdly optimistic assumptions.The following are usually false statements:
"the story is so good, I have to own this stock"
"it's so far off it's highs, it has to be undervalued"
"if you wait to buy, you'll never buy, because the stock will never go out of favor"
"Everyone says it's a great company, and the stock has been going up and up, so it has to be safe to own, even though the PE is ____" (pick any number over 30 for any tech stock, and any number over 10 for non-techs)
"longterm historical valuation ranges aren't useful today, because _____ is different now" (fill in the blank with your optimistic phrase of choice)
My buy targets begin with the simple (simplistic?) formula:
Fair value = (forward 12M EPS) X (LT EPS growth rate). I often use different EPS and growth rate numbers than the analyst consensus. And, I change my numbers when I find I've guessed wrong (a lot of that lately, especially the forward earnings). Then, I adjust that fair value number up or down, using a variety of subjective factors: reliability of earnings, position in the industry, macro factors, strength of balance sheet, barriers to entry, etc. I look for reasons not to buy a stock. I use current sentiment, and analyst recommendations, as contrary indicators. I never buy a stock when it is universally loved.
Once a stock is approaching my buy price, I use FA. If a stock bounces several times at a price just above my buy price, I'll adjust my limit buy orders higher. If a stock is setting new lows every month, I'll hold off on buying, even if it's reached my buy price, until a bottoming formation develops. I've learned (the hard way) to buy in increments. 7 stocks in 7 different sectors is adequate diversification for me. |
