Wait, watch and then make your move
Wait, watch and then make your move
What a wise guy won’t tell you about trading is that it isn’t much different from a stakeout; you wait and watch an awful lot.
You see things happen that make your stomach sink, but the ultimate truth is that nothing but guts and a lot of black coffee is going to help you pull through this.
Didn’t your mother tell you there’s safety in numbers? Let’s walk through it together.
How to pick ’em
Stocks aren’t much different from automobiles.
Pick the ugliest one, and it’s almost always the cheapest. You’re not buying for love, you’re buying for performance, and if there’s one commonality in securities, it’s that cheap can often be good.
Cheap can mean one of two things. You’re either buying a stock that’s lost value for no good reason, or you’re buying something that no one else wants because its prospects for growth are not there.
If you pay 10 cents on the dollar for a stack of counterfeit bills, you might find that the paper they’re printed on is flimsier than the brim of a fedora left in the rain.
Pay 50 cents on the dollar and you’re either a sucker or you’re buying something that looks much like the real deal. The moral? There are always exceptions to the “buy cheap” rule.
One way (one of many, in fact) to find something cheap in the markets is to follow a stock’s price to earnings (P/E) ratio. That’s just a fancy phrase for the ratio of a stock’s current price against the company’s earnings per share. I’ll spare you the dirty details here and simply tell you that a rough rule I play by is if a company has a P/E ratio from 10 to 17, it could be fairly valued.
Now compare it with its own industry’s standard and weigh it against the broader market. Now fold it up, put it in your pocket and walk away slowly, because you might have gotten yourself a deal.
But maybe not, because this only works for some stocks, and there are so many caveats you’d be better off reading a book than just taking my word for it.
Still, you wanted pointers, so you got ’em.
How to know when to get in
If you’re looking to lift some hot goods out from under a grifter’s nose, you want to case the joint first and wait until the location has cooled. Remember: the less traffic you have, the better. You have your reasons to be on the stealth, and I don’t care to know what they are.
Lots of guys like to grab the goods when no one is watching and I’d count myself among them, so I wait until the markets have turned for the worse and it looks as if no one is around. That’s when I buy: when all eyes are elsewhere.
How to know when to GET OUT
Like poker, when you’re on top, you want to stay there. But the flip side is that the tide can turn and bring you down.
So you’ve picked your stock, you’ve bought it cheap, and you’re riding high in the markets. Get out, right? It’s easy to know in hindsight when the high note has been hit, but the reality is that you’re riding sentiment. This means that everyone around you is telling you that there’s nowhere to go but up; meanwhile, down can be right around the city block.
Let me smack some sense into you: Don’t get greedy.
It’s like robbing a bank; make your money and flee the scene.
If you’re like every other schmuck out there, you bought, you held, you collapsed with the markets and now you don’t know when up is up.
I can tell you that some incredibly intelligent guys think they’ve got it figured out with their “support levels,” “resistance levels,” “fundamental analysis” and on and on.
Do you know anyone who’s right all of the time?
Meet me here again some other Sunday and we’ll go back into the noir together.
Anthony M. Conte, MSFS, CFP is a managing partner with Conte Wealth Advisors LLC in Camp Hill, 717-975-8800, firstname.lastname@example.org. Registered Representative Securities offered through Cambridge Investment Research Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative Cambridge Investment Research Advisors Inc., a Registered Investment Advisor.
Cambridge and Conte Wealth Advisors LLC are not affiliated.
The opinions expressed in this column are solely the writer’s and do not reflect the opinions of The Patriot-News. Before acting on financial advice, readers should consider whether it is suitable and consider seeking advice from a financial or investment adviser.