Hi, Viviene,
I think the current bear market is offering another great opportunity for many people to make a lot of money when the bull market eventually returns. It all depends on one’s mindset in order to do well. A person with a negative mindset would always be fearful of losing and think of all the reasons why one should not buy in a very bearish market full of uncertainties and more bad news to come. However, one with a positive mindset would think of all the probable ways “to make a killing” in such an environment.
One of the common issues facing most investors is – WHEN TO BUY & AT WHAT PRICE LEVEL? The best answer that I have found is as in the Donkey Story – ALWAYS THINK POSITIVELY & OUT-OF-THE-BOX and DO ONE’S HOMEWORK & WORK OUT A PLAN THAT SUITS ONE”S RISK APEPTITE & RESOURCES.
ILLUSTRATION: Assuming the price of a condo unit has fallen from $1.5M to $750,000 in a property market downturn and the general market outlook is that further drop in prices as well as economic recession are widely expected. Question: When is the best time to buy & at what price level? A reasonably good answer here would be to use a reference point like – Developer’s Cost Price (No developer wants to sell below cost to lose money & price downside risk is usually limited thereon). Any discount below this price should be considered good value and a suitable entry time. Buy another unit, should the price drop further and one has the resources (must do homework first). Similar principle is also applicable to stocks.
In looking back, I realise that a lot of feared events have not happen, such as Greece exiting the eurozone and the breakup of eurozone. I think usually our fears are overdone, we shld c**** ourselves out of this mindset. Wat do ya think?
It's not just Fundamental Analysis but also Luck at play in the stock market. If there is a sustained upturn, everybody gets lucky with whatever stock he / she picks. In brief, I would buy in these times because I wouldnt buy when everybody is sunny and happy. Just like shoes & bags -- buy them at ulu outlets during Big Sale, instead of at full prx.
Heehee – Under the current economic and market environment, my stock strategy is to stay focus on any growth stock that is considered to be at attractive or reasonable valuation (if I can find one); otherwise just stay on the sideline and conserve cash. With growth stocks, the downside risk is considerably less and their stock prices are more likely to rise to much higher levels on pressure of better earning results. Furthermore, I would not be too concern of whether the market is bullish or bearish over the next several months. If it is the latter, I have every reason to accumulate more at cheaper prices or accumulate as a core holding if a stock is at a level considered to be “offering low downside risk but high potential capital gain”.
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[Heehee 25-10-2012]:
Hahaha, good story, observer2. Just saw this.
How is your stock strategy now?
Hi Observer2,
I note your preference for growth stocks, do you actually screen dividend stocks too? I find dividend stocks easier to value. How do you actually value "growth" in companies? What are the factors that made you sure that the growth will pan out?
Also, in growth companies, do you mean penny and mid-caps, since they have more rooms to grow, in terms of % of revenue and profits as compared to blue chips (unless you are bottom fishing). Given the volaity of mid caps and pennys, how do you determine the entry price/ safety margin?
Would like to hear your views and thanks in advance.
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