NA Stock technique

Let'sgoflying!

Let'sgoflying!

Touchdown! Greaser!
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Dave Taylor
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Here is my stock purchase technique. Well, I haven't actually tried it yet but I think it has potential! This is a current, real example that you could use play-money on to see if it works for you or not.

The principle is to find a company that has suffered bad news, but not such bad news that it will kill the company - bad news that it is very likely to fully recover from. Buy when at nadir, chances are most will show gains.

Chipotle (CMG), the international restaurant chain has had some bad news lately but I think it will recover. E coli in the food, dozens ill - no deaths.
They are deep cleaning +/-50 restaurants. Like BlueBell, I think their losses will not be fatal and once clean, will reopen and confidence will return.

"Buy" some CMG when you think the worst is past and when you think there will be some gains to be had.
One of your biggest challenges will be deciding when the stock is starting back up. Buy too soon, and you might see more sliding. Too late and you lose out on some 'up'.

I have watched a few companies do this over the years and would have made $ if I'd followed this method, but didn't have the guts or spare cash at the time.
 
I have done something like that. At times when the economy has dipped and stock prices power dived, I diversified and made small investments in a lot of companies. It has paid off so far.
 
"Run when others walk.

Walk when others run."

"Never attempt to catch a falling knife".

"even a dead cat will bounce if it falls from a great height"

"Don't fight the tape"

"The trend is your friend"

"Be fearful when others are greedy. Be greedy when others are fearful."

"The individual investor should act consistently as an investor and not as a speculator."

"The four most dangerous words in investing are: 'this time it's different.'"

"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute."
 
RJM62 said:
I find buying low and selling high to work pretty well.

Rich
Click to expand...

I guess this is why my investment strategy isn't working, I buy high, sell low and try to make it up in volume! :D
 
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I kind of had this thought after 9/11
I recall hearing AAL stock was crazy low. I was broke though.
 
Good theory if you have the time and money,to do the research and make timely investments.
 
Let'sgoflying! said:
Buy when at nadir, chances are most will show gains.
Click to expand...

How did that work out for Enron? Pan Am? Circuit City?

I actually did OK on Chrysler near its lows in the 1980's.

Tried it with Pan Am, and it went down the tubes.

Not to say it can't be done. But barring inside information, everybody has access to the same information you do, and have baked that information into the current price.

Recommend "One Up On Wall Street", "Fooled By Randomness" and "A Random Walk Down Wall Street".
 
How did that work out for Enron? Pan Am? Circuit City?
snip
Tried it with Pan Am, and it went down the tubes.
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I don't think I emphasized the part about:
"but not such bad news that it will kill the company - bad news that it is very likely to fully recover from. "

Maybe I should go back and embolden the text?
 
Let'sgoflying! said:
I don't think I emphasized the part about:
"but not such bad news that it will kill the company - bad news that it is very likely to fully recover from. "

Maybe I should go back and embolden the text?
Click to expand...

Or maybe reconsider, in that you never know which piece of bad news is the one from which a company will never recover, setting up a death spiral.

It only becomes obvious in hindsight, which really isn't much help.

And, again, both the bad news and the company's potential prospects to recover are equally known to all investors, and are already factored into the current price. IOW, if it's obvious it's "bad news that it is very likely to fully recover from" the price would not have dropped in the first place. You're assuming it's obvious to you, but not to others.

But intuition can be your friend, and you may be able to outsmart everyone else by seeing something in the information that they don't.

So good luck, and let us know how it works out for you.
 
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Dave,

It's not a bad initial thought. You still have to price the asset relative to its future cash flows. Because, as Jose left off in his stock market aphorism list:

“What do you call a stock that’s down 90%? A stock that was down 80% and then got cut in half.”
 
First, I'd suggest starting with a list of companies you'd like to own and be patient for buying opportinities. Barring that, a discount on bad news really doesn't tell you anything. Also, be wary of your observation that you've noticed this pattern over the years. Our brains are wired to find (create) patterns. Kind of like when you think of someone and then hear from them that day -- how many times do you think of someone without hearing from them? -- not very memorable.
 
rpadula said:
Dave,



It's not a bad initial thought. You still have to price the asset relative to its future cash flows. Because, as Jose left off in his stock market aphorism list:



“What do you call a stock that’s down 90%? A stock that was down 80% and then got cut in half.”
Click to expand...


And this one still has a 31 pe.


Sent from my iPhone using Tapatalk
 
Bump for this....

On November 20, it closed at $536.

Watch out below today, after hours. Will be interesting to see where it opens tomorrow.
 
JoseCuervo said:
Bump for this....

On November 20, it closed at $536.

Watch out below today, after hours. Will be interesting to see where it opens tomorrow.
Click to expand...

Bump again.

Today it closed at $494.61
 
I kind of kick myself back when Ron Wanttaja was giving us a play by play on the Boeing engineers strike. When he said it looked like they were going to settle, I told Margy we should buy some Boeing stock. It would have worked.
 
Sam D said:
Bump again.

Today it closed at $494.61
Click to expand...

Are we calling bottom? That's what I want to know though I believe the company will survive this situation and that even now the stock might be a deal.
 
SkyDog58 said:
Are we calling bottom? That's what I want to know though I believe the company will survive this situation and that even now the stock might be a deal.
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I'm not calling a bottom. Although I will have claimed to if it is indeed the bottom! :D

Actually, I was pointing out how hard it is to call the bottom. It's 10% lower than when this discussion started with the idea of "why not buy on bad news." My point is, without having an independent view of what the stock's value actually is, its hard to say when it becomes a bargain.
 
Sam D said:
My point is, without having an independent view of what the stock's value actually is, its hard to say when it becomes a bargain.
Click to expand...

As I said, everything popped into focus for me when I just accepted that a stock's "value" is always its current price.

Or anything, really. From tulips to Warhol's.

On tomorrow's opening, I have orders in for a bit more Tesla and Ford. Of course I hope they go up, and that Ford keeps paying its healthy dividend. But I have no illusions that they're "bargains", and the random walk theorist in me is aware that short term they are exactly as likely to go down as up. But the value investor in me still sees value in each company, albeit for very different reasons.
 
FastEddieB said:
As I said, everything popped into focus for me when I just accepted that a stock's "value" is always its current price.

Or anything, really. From tulips to Warhol's.

On tomorrow's opening, I have orders in for a bit more Tesla and Ford. Of course I hope they go up, and that Ford keeps paying its healthy dividend. But I have no illusions that they're "bargains", and the random walk theorist in me is aware that short term they are exactly as likely to go down as up. But the value investor in me still sees value in each company, albeit for very different reasons.
Click to expand...

Well, you're in good company with a recent Nobel prize winner!
 
Its called contrarian investing. Just be sure you really know why the stock is down.
 
The media is still hitting it pretty hard even today, I am not thinking it is ripe to buy at all!
The feds have opened a new investigation on Monday and Chipotle has not even produced a 'safety plan' for previous problems. This is dragging out the 'bad news'; it is not like the Deepwater Horizon incident in which 2.5mo passed before BP started to upswing at all even with a compressed timeline for their bad news.
 
On another forum, it's been opined that Chipotle spent too much time focused on ridding their menu of GMO's (which have, to date, never hurt anybody), at the expense of just improving overall food safety.

Not saying I agree, but it's a thought.
 
As a full time trader i gotta say i will not touch that stock. Sure could be a huge bounce but so much opportunity out there that cant bother with it.
 
All the bad news isn't done for Chipotle yet. They have a long drawn out court case in front of them. They're going to be on the bad news page for a while. But even when this bad news is over, they will continue to have a big PR problem.
 
If I get a chance I'll be eating there just to give 'em a vote of confidence.
 
I did this a few years back and forgot about it. Grabbed 10 stocks that were 0.50 price/book, with market cap > 100mm. Didn't recognize most of them, quick read and dump anything that I didn't understand how they make money. Promptly forgot about it. A year and a half later, five picks were zeroed out, the other five were 2-5x increases in values. Great strategy if you can avoid the heart attacks.
 
CMG down 1.91 percent again :) just not one I like to trade.. I DID however just buy USO... Never been an oil trader but at 9.80 a share - Not much risk. Never once have a topped off and got it free :) Not an ordinary trade for me - but one I think overtime will do quite well....

Oh and JNJ is under 100 a share... always nice to sell some naked puts down there for some quick premium. Great trading day today all!! Volatility is up and option premiums are RICH!
 
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