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Market in the Dumps? Go Shopping for Discounted St
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KiLrOy
Master |
25-Oct-2007 09:42
Yells: "I buy only what I can see." |
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All are good questions in which I have also asked myself few years back. If you desperately wants to drive a car, you will take lessons and LEARN how to drive. If you aspire to be a good Project Manager managing global projects, you will immerse yourself with knowledge and be certified by PMI for PMP so that when people talk about Earned Value, IRR etc you know what it means and knows how to run a project according to industry standards. Similiarly if you WANT (I didnt use WISH) your investment to profit by investing in corporate businesses, you should also learn the fundamentals. What are the fundamentals? Fundamentals are the financial characteristics of a company. They refer to the amount of debt a business has, the level of profitability, the available cash on-hand, inventory and receivable turns, as well as return on equity, assets, and investment. These characteristics are used in fundamental analysis to determine the suitability of a particular stock or bond for investment. They provide a standard that can be used to compare two businesses in the same industry or sector. If a company is going deeper into debt and making less money each year, the fundamentals are said to be deteriorating. I dont profess I know all about fundamentals nor do I have the all the time to look up businesses with good fundamentals (I have other things I like to enjoy as well) so sometime I pay for these advices (nothing is free in this world, if its free its junk). Similarly if I DO NOT want to know how to drive, I will hire an Ahmad to do the driving and I will tell him where I wanna go. Personally I think its a lot of hard work but it pays off if you do it right (be it you do it yourself or invest in someone who does it for you). A simple reminder for myself is to just keep it simple. If I do not understand the business or/and its fundamentals, I move on. In any case, I signed on SJ to post those trading techniques and for that very reason I am forced to read and remind myself. Pinning up on my own office board doesnt seems to help. *wink* So if anyone does benefit from it, good for you. |
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Livermore
Master |
25-Oct-2007 07:32
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Some say it is hard to find stocks with potential and thus they play with market sentiment and prefer to sell off rather then hold the stock for too long. I don't quite agree it is hard to find stocks with potential to grow |
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Livermore
Master |
25-Oct-2007 07:25
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I agree with Fairygal. If one had vested since one year ago, you would still be way in profit if you had been focus on your stocks with potential. Too much buying and selling with too many stocks sometimes result in you forgetting to buy back after you sold off those potentially good stocks. One year ago, some of the people here bought Wing Tai at around $1.50 but not sure if they still have it. Wing Tai is now $3.48. |
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Fairygal
Veteran |
25-Oct-2007 07:14
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Altho we are small investors, we should think like we buy into the business. Know the business and understand the industry as a whole, and the standing of the company. Of course profit loss is a big consideration. Once you understand the business, you will understand the company as well as its standing. Then judge for yourself if it will be a profitable company in the future or not and its growth potential. |
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psycho
Member |
25-Oct-2007 01:15
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Hi KiLrOy, your post does make alot of sense, pardon me for asking : How does one determine a business with solid fundametals and growth ? Is it enough from just the annual profit/loss reports or are there other areas to look upon too ? Thank you |
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KSwinwin
Member |
25-Oct-2007 01:12
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But what's the yardsticks of a fundamental sound company? |
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KiLrOy
Master |
25-Oct-2007 00:00
Yells: "I buy only what I can see." |
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This is not theory. Its about knowing what you have bought. If you buy a stock based on stock price HOPING that it will go up, then you are in for a ride, but if you buy a business with solid fundamentals and growth, you will know what I mean. Are you a value investor yourself? |
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winsontkl
Elite |
24-Oct-2007 23:54
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KILroy, wonderful article and sound good on theory but how many can be disciplined to follow thru especially when emotion runs high be it UP or DOWN. Cheers. |
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KiLrOy
Master |
24-Oct-2007 23:46
Yells: "I buy only what I can see." |
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Market in the Dumps? Go Shopping for Discounted StocksThe market is in the dumps and everyone is headed for the exits ? what?s a smart investor to do? You might consider going on a shopping spree for discounted stocks. When the markets are down and the mood pessimistic, people tend to sell even if there is no specific reason to let go of an individual stock. This common trading mistake costs investors dearly. When the talking heads on television and the wags in print and online begin talk of doom, many investors dump their stocks in favor of cash or other ?safe? investments. Rushing InAs soon as the same crowd gets excited about the market again, the cash investors rush back to the market and buy stocks. The problem with this approach is that the investor is frightened out of the market when prices are depressed and lured back in when prices have rebounded. In other words, sell low, buy high. The thoughtful investor always asks why the price of a stock is moving before making a decision.
These are not all the questions you should ask, some will be specific to the industry or sector, but you get the idea. When you can find nothing in the answers to questions specific to the company, you look to the market. Is this stock dropping (or rising) because the overall market is moving dramatically in that direction? It can work both ways, although a down market seems to depress overall prices more than an up market raises overall prices. Shopping TripIf you are looking to add to your portfolio, consider a down market a great shopping opportunity. A thoughtful investor is going to buy on the potential of a company and if he or she can pick the stock up at a discount so much the better. This investing approach takes some courage and confidence in your ability to distinguish between a stock price depressed by a down market and a stock that is fundamentally flawed. However, if you do your homework, you?ll find bargains in down markets that may reward you handsomely in the future. ConclusionDon?t be frightened off a stock just because the overall market is sour. If the fundamentals of a company are solid, a down market may be a great time to do some discount shopping. |
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