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Wasn't making any predictions here. I am only saying from the fund managers
studies and also my own experience that those stocks that have disappointed in
this way while being this widely held have a tendency to underperform later. Of
course you might view an opportunity here. My point is only that I tend to seek
the highest risk reward trades. On this one, risk is maybe 20%, but what's the
upside? Are there better opportunities out there?
That's the kind of question I am asking myself. Given the documentated history of
likely underperformance in such cases, I tend to think I might be better of
investing in a less troubled stock. Also I prefer praying everything keeps on
humming along nicely, rather than praying this thing turns around. In other words,
I prefer going with the flow, rather than bet against it, unless I have a very
good reason to do so, ie i know or understand something the market doesn't and
hasn't factored in.
So yes it might turn up, once those indics say so, but is it going to be worth it,
is my money well used there, or am I better off seeking other uses? After all, I
am not a fund, Money is (still) a scarce resource for me... <g>
Best to you,
Gwenn
wong wrote:
> Hi All:
>
> Hindsight will tell...
>
> The bears have been saying for the last few years - stocks are overvalued;
> pe ratios are way too high; bubble is going to burst; commodity prices are
> bottoming out; gold price is going to rise...
>
> We all know that this will happen, just don't know when.
>
> Think back a few years. If we had followed their line of thought, we would
> either have gone short or staayed out of the bull market entirely.
>
> I guess one way of investing/trading in LU is, as I've pointed out, is to
> wait for confirmation of 2 indicators, weekly basis. And to be more
> cautious, go for monthly data, and maybe confirmation of at least 5
> indicators.
>
> The other way is to look at the stock price over a number of years. What's
> the probability of a great (or has-been-great) stock that would still go
> sharply down for another 10-15 points to $40? And after that, what's the
> probability of a further down of 5-10 points, i.e., $35-$30? And what's
> the probability of it's still going further down to $25-20 area? As it
> continues in its southward journey, I would say the probability will be
> getting smaller and smaller. True, LU might just stay at a low level for a
> long, long time, but then one either misses the opportunity or risk getting
> in too early.
>
> Another way of minimizing the pain is to scale down (=averaging down) in
> one's buying. Initially, spend a small portion of the intended money (for
> LU), and gradually buy more (proportionally larger amount of money) for the
> next 2-3 rounds.
>
> A third way is to limit the LU purchase sum to a certain portion of total
> money to be invested in everything.
>
> So suppose you have $100,000 and you intend to invest in 10 different
> stocks/options, then the portion to be invested in LU should be no more
> than $10,000. (3rd way)
>
> Divide the $10,000 intended for LU by 3 or 4, you get $3,500 or $2,500
> equal portions. (2nd way) Or you may want to have a weighted thing. Say,
> you intend to buy 4 times (=3 times averaging down). 1+2+3+4=10. Your
> first purchase may be 1/10 of $10,000 = $1,000; your second purchase may be
> 2/10 or $2,000; your 3rd purchase may be $3,000 and your final purchase may
> be $4,000, and so on and so forth. Or some variation like that.
>
> Look at a multiple-year chart of LU. Decide on the likely declines and
> (subjective) probabilities of such events. (For example, from $53 to $50:
> probability=95%; from $50 to $47 1/2: probability=80%; from $47 1/2 to $45:
> probability=60% etc etc) Then decide on the lowest price level where the
> probability of decline is no longer so significantly certain. For example,
> you figure LU would not go lower than $20. Also, decide on the 1st price
> level you feel you should start investing (either waiting for confirmation
> or just plunge in at certain low level). For example, you decide you won't
> begin to invest until LU goes to near $40. After that, decide how many
> times you want to buy altogether (3 or 4 times?).
>
> Let's say you start investing at $40, and will average down no further when
> LU drops to $20. If you're buying 3 times, then perhaps you want to buy at
> $40, then $30, and finally at $20. (There's an infinite number of ways of
> arriving at whatever you intend to do. Just make sure you don't average
> down every $ 1/2 decrease...)
>
> Still too risky and not to your taste? No matter. Forget about LU and
> look for something else. There are always some stocks much better than LU.
>
> That's all I can say, and hopefully, I don't have to post publicly about LU
> for a long, long time.
>
> Thanks for the various suggestions and possibilities. It's been a very
> interesting and learning experience for me.
>
> Regards,
>
> Wong
> ========
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