>>so short y2ks and find
a co. to long that that can provide the goods. any
reply or thought. thanks tj.<<
Yes! you just got yourself your own hedge fund! The thing to keep in mind is that for active investing, you need to have a decent backgroud in understanding the different aspects of business. Know the market, the co's products, assess the competition, be capable of interpreting financial statements reasonably well (particularly how the BS, IS, and CF statements, and most importantly how these are linked. Got to know them like the palm of your hand! If you don't know these the best thing is to tske a course in financial accounting). Otherwise accountans can pull some very cute tricks on you. On top of that, you need to know a little bit about modern financial theory which I will summarize for you in a few short principles:
1. The markes are fairly efficient finding mispriced stocks ain't that easy. For safety, many people stay away from high multiple stocks as even though there is a chance they may be priced right this may be a faulty assumption as the momentum (i.e., tulip) traders will pump up a rising stock regardless of fundamentals (i.e. the y2k stocks). You see the problem with y2k stocks is the high multiples, the very limited time horizon to make up the earnings mneeded to justify these multiples,and on top of that great competition and a market that may not be as juicy as people believe!
2. Diversification reduces risk because stocks don't go up and down in sync.
3. Be patient and do not trade excesively. Research thoroughly and then make the move and hold. Otherwise you broker(s), and more importantly these days the market makers, are the ones that are gonna be making the profits and you will just become part of the sell low buy high crowd (you may be capable of trading at $14+ or even less but just look at the spreads on low volume Nasdaq stocks and you will understand what I mean. Many of those guys pretty much run a "legal scam")
Pancho |
