I have been reading this forum for some time and every once in a while I see a post mentioning stock market investing. Because nothing here will ever cash flow, I started wondering if the some of the same principals talked about on this forum - namely:
Run the numbers and trust them. Don’t listen to what other people think the worth is. To them it may be a loser one day, the hottest pick the next.
Buy low and sell high. Or at least buy at a discount and hold on till you make a profit.
So I figured I would take $500 and test the market. I found a stock that was selling for 17.50. When I ran my VERY conserative numbers, I concluded it was worth $16.95. I watch as it fell to $17 then to $16. At this time analysts were talking about how bad the company was expected to do in the next year - “Analysts … said that the company’s results aren’t as good as they seem, and that overall, (their) business model is still decaying.” However, the only reason I could see for the price falling was people were in a panic.
On 4/28/08 the stock was at $15.35 (about 90% of what I thought it was worth), I decided to buy. I purchases 33 shares at $506.55. I thought it couldn’t possible go any lower - but of course it did. I held on and trusted my numbers. I watched as it fell to $15, then $14, finally bottoming out at $13.57 (about 80% of what I thought it was worth). It was so hard not to cut my losses and move on, but instead I did what seem counterintuitive - I bought more - it was SOOOO hard to do. I kept thinking, trust your numbers, just trust your numbers. Keep your emotions out of it and trust your numbers.
Today (5/16/08) - a mere two weeks later, the same analysts are talking about the company’s “financially savvy management team” and have upgraded it to a buy and sector perform. As of right now it is at $15.84 up from $15.66 at the opening bell- with the Dow down 61 points. At any time, I can sell and recoup my commission and a little more. I am still waiting for $16.95 maybe it will happen today, maybe next week, maybe next month. My only regret is that I didn’t buy at a steeper discount. Sound familiar?
I purposefully left out the name of the company because I didn’t want to hipe the stock and besides it doesn’t matter. (If you really must know which company it is, PM me). Just like there different regions of the countries to invest in real estate, there are different sectors of the stock market. Each region has its undervalued properties, each sector has undervalued stock. You need to work to find both.