First, you need to know that I am still a novice!
But, since you asked:
In a stock that I'm unfamiliar with, I like Michael Burke and Cary Salsberg's system of thirds (though they each might implement it a little differently) - that is, to commit only 1/3 of what you're willing to invest in a company at what you would consider a fair price, saving the other 2/3 for opportunities when the stock trades even lower, picking up the last 1/3 at what should be the very bottom for a stock. Furthermore, in a stock I haven't followed for long, I would buy my first 1/3 at a level where the stock gets a lot of support - when we talked about MEDX, this was around 6; for GLFD it was around 17 (post-split); for HGSI, it looks like that would be around the high 30's. If it went to the low 30's but the fundamentals still looked good, I'd pick up some more; if it got to 25 or so, I'd be in it fully - again, assuming the fundamentals remained good (i.e., major partners still on board, maybe one drug didn't pan out, but a number of other are progressing well through the pipeline). This technique means you'll miss out on some winners that may never retreat to these levels, but it also means you're unlikely to ever lose much - and when you do pick up a winner, you get in at a good price. There's so many good companies out there that one should never worry about missing a few winners!
Good luck! |
