Count: re. trying to catch the falling knife. You will want to develop a methodology for dealing with these types of purchases. A three-year holding implies to me an investment operation (although I'd guess from your your post, you don't hold a stock that long). Anyway... my general guides are:
1. When I see value...I try to buy it. I don't dodge away waiting for the absolute best price. If there is no doubt about the value (which means some margin of safety is already in the stock price) and yet also there is fear and loathing about the falling knife ---BUY the stock.
2. Anybody whose name is Count de Monie or Senior will see the stock drop after he/she buys it. Therefore, purchases are lagged into. Like 1/3 now, 1/3 few points lower, etc. (I say 1/3 based on Mike Burke - see his thread-- but other fractions okay; or lag in by time- 1/3 now, 1/3 in next quarter, etc.; or by quantity-- 100 sh. to start, 300 sh. bought 3 points lower, 500 sh more added 5 points lower. Main thing is keep diversified portfolio of stocks. (Unless you're shooting for the moon and putting all your knowledge and dough into one position-- then none of this applies.)
(To me, how one establishes a position in a particular stock is a huge key item in investing. And to me, it's almost like determining whether you are a TA person or a fundamentalist. Will you be a person who primarily averages down or will you be a person who primarily averages up (pyramids) in a stock? Or perhaps something else- just a large initial purchase with short-term trading smaller amounts as stock moves up/down? Each must determine his/her own preference.)
3. It isn't going to be about buying. The problem will be holding. On the rare times when Monie or Senior buys a stock and it bounces up and maybe stays there -- that's easier. Hold those sweet gains for more or even sell out for a quick profit - or sell half and hold rest. But... when the stock just declines or just sits and sits -- and other stocks seem oh-so-tempting---- that's where the difficulty is-- IMO.
And I'll state right now -- I don't feel so successful with either being able/willing to employ these guidelines or in sticking with them once I start a position. Apparently, not very successful at all as I look a my portfolio screen with lots of stocks I'm underwater in, and portfolio value dropping steadily -g-. Paul Senior |
