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Strategies & Market Trends : The Art of Investing -- Ignore unavailable to you. Want to Upgrade?

To: towerdog who wrote (5587)

9/30/2022 6:49:59 PM

From: Sun Tzu

Read Replies (1) | Respond to of 10695

Cyclical stocks mean revert. Think about what it would mean for one of the largest American semiconductor companies to be at 20 year lows even though the US government is handing out subsidies and pushing the rest of the world to buy from them instead China or whoever else. What kind of industry cycle would we have to be in the midst of for that? How likely is that?

And BTW, the company is in a strong financial position and able to buy whatever tech company it wants at the bottom of the cycle. And even if they don't and the whole industry goes down the tube, it is more likely to survive and inherit a low competition landscape than not.

Is it guaranteed? Of course not. Anything can happen in the markets, even negative oil. For all I know, a nuclear war or something worse can make every stock worthless. But that is not how one should invest.

As for buying after they have bottomed, easier said than done. How many people bought NRGU at 20 vs at 800? Plot the dollar amount traded chart and see. Nobody wanted to buy near the bottom. Everybody and their cousin has been into oil since the summer and has been holding the bag. Why is that? Don't these people know to buy after it bottoms and sell when it tops?

For the record, I started buying NRGU in the summer of 2020 and put in a set of GTC buys where the last position was 60% below the first one. It is posted somewhere on AJ's or another thread. Everyone advised me against it. And yet, looking at the chart now, which price point during the summer of 2020 would you have turned down?

Not everything works that way. As you know, I am not in favor of buy and hold forever, nor do I think that stocks go up in the long run. But I do believe that so long as a company is not going to go belly up, large cyclical companies will mean revert. So if you manage to buy them in the bottom pentile of their cyclical valuations, eventually you should be able to sell them in their upper pentile.

PS Each order was double the size of its previous one. I am sure you can add up my average cost (84+150+252) / 7 = 69.42 Sold prematurely at 90 b/c it rose too fast. Ditto for BFLY, though I doubled my money on that one. Intel may take longer, but that is ok.

Also, XBI starter GTC buy went through @84.

XBI starter GTC buy went through @75.25 I will be averaging down on XBI in incr

FYI, 3rd order of XBI went through today @63. As explained before, I am doublin