Quote:
Originally Posted by Airelon
What you have to worry about there though, is the broad sector. I found out (the hard way) in 2001, that even stocks that are priced fairly? Can still suffer from the broader market. I was buying fair value, but they were still suffering from broader market downturn. DCA (Dollar Cost Averaging) helps mitigate the risk from the broader market in truly good stocks - but that is geared more towards investors, than traders.
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Airelon:
1st: It is recommended that you buy below fair value. You then sell @ fair value. If you are lucky, you can sell above fair value.
2nd: Nobody can predict the broader market quite accurately. Shares that is trading below fair value, will eventually rise towards fair value.
3rd: My experience so far, undervalued beaten-down stocks do not follow the broader market. Example: Altria (MO), Financials like WM, KEY etc. in the early 2000, Merck (MRK), in the 2005-2007, clothing retailers (GES, RL, ANF, AEOS) in 2003-2006. Can't think of others on top of my head but you can check others as well.
4th: I agree with DCA. Been saved so many times with stocks that went down a lot in value, before eventually turning up quite significantly.
Of course, the toughest thing is to know what 'fair value' is. This is what I'm truly obssessed about.