It is quite evident that 100% accuracy in stock-picking is not possible, even for a legend like Warren Buffett. But rational analysis will probably
ensure that you're right 80% of the time, which is more than enough to make you fabulously rich, if you take the care to diversify your holdings and not overweight in one "favorite". My short-term prediction on Dell is a highly speculative one, and I wouldn't put half my portfolio, or even 10% of it, in such a pick. In any case, I would probably buy a short-term put to hedge it, in case anything went wrong. Same for my long-term forecast: Shorting is a very risky practice: your gains are capped at 100%, and your losses are theoretically unlimited. Unless a stock goes down by a significant percentage (say 20%+) in a short period of time, shorting is not that profitable. In the case of Dell, I feel that the decline will be a long and protracted one, as every PC maker moves into direct sales and begins to outsource production. For a prudent investor, it is simply just better to watch the decline from the sidelines than to aggressively short the stock. But that depends on your taste and risk tolerance. |
