Barry G. and Ibexx:
No, I didn't short Intel. I got in at 69, and out at 86, and then watched unbelieving as the stock promptly broke above long-term resistance, just after I sold. I made a bunch of money quickly, and could have made a lot more if I'd held on a couple more months.
I took the money, and bought AMAT longest-term leaps (tripled in value so far), and hedged with a lot of (now nearly worthless) NVLS march puts. I'm also holding a lot of cash, because I can't find anything to buy. I'll sell the puts soon, for the tax loss (wipes out about half my short-term cap gains for the year). Then I'll have to decide whether to hedge my overvalued long-term positions with higher-strike-price intc,mu,nvls, or ibm puts. I'm glad I bought puts instead of shorting; at least, with puts, there is only so much you can lose. :(
I've got whiplash, trying to follow these stocks this year. I try to follow a Growth-At-A-Reasonable-Price investing strategy, and I've noticed a consistent pattern: I do a good job picking entry points, but a lousy job picking exit points. I sell when the stock is at the upper end of its trading range, or has had a huge runup, or I calculate it's overvalued (by comparing trailing PE to expected growth rate). I've done a lot more trading than I intended to, because my stocks have hit my sell points a lot quicker than I expected. Then, the momentum investors who I sell to, ride the stock up to levels I consider absurd. I bought AMZN at 18, sold at 56, because I thought the next 5 years of growth was already in the stock. The investors I sold to have done quite well.
As I see it, I have 3 choices:
1. continue doing what I'm doing. I'm making excellent returns. The fact that the market is willing to price many stocks (especially big-cap growth stocks) far above their intrinsic value, doesn't mean I should hold them. Sooner or later, Mr. Market is going to stop paying a PE of 40 for stocks with a growth rate of 15%.
2. Stop selling. Do what I've shown I can do well (picking stocks and entry points). Then, just put them away and forget about them until retirement. Maybe read the quarterly reports, just to make sure they are still growth stocks. Ignore the stock price. I've spent a lot of time, this year, agonizing over whether I should sell various stocks. I would have done better, had a more diversified portfolio, paid a lot fewer taxes, and worried less, if I hadn't sold anything all year.
3. Join the herd and become a momentum investor. Forget about fundamentals. Buy stocks after their PE has gone from 20 to 40, and ride them up to 60. That seems to be the way to make money in today's market. If I had a gambler's temperment, I'd do this.
I'm trying to decide between options 1 and 2. |
