For the last few years I have been trying to master the art of value based stock investing. I tried Warren Buffet type stocks, but had limited success. I decided that what you buy is as important as when you sell. I purchased CBI too late. Warren had already sold his shares, but I didn’t even realize it because I have no way to get news of what Warren Buffet owns until after the fact. The stock crashed, and I had to hold on to it for along time with hopes that it would come back up — and it just did.
My main stock strategy consists of assessing values of solid companies and having a mix of banks, food, and tech companies. I do not buy much outside of these sectors. I’m paranoid of a horrible depression where the only companies to survive are the ones that deal in food and bottled water such as Coca-Cola and Pepsi. When one stock goes up and another goes down, I sell a little of the one that went up and buy a little of the one that went down. To implement this strategy successfully you need to like a stock enough to keep buying it when it goes down. That means you don’t lose faith in it. Only really solid companies qualify for this type of investing such as Coca-Cola, IBM, Wells Fargo, etc.
But, what I realized was that I didn’t keep any cash on hand. If some stock went down all of a sudden and I needed to buy it, I had to sell something else at a possibly inopportune moment to get the cash together. I’ve recently decided to try to keep a certain percentage of my assets in my investment account in cash, so that I’m ready to jump on an unexpected opportunity. I keep my eye on the stocks I’m ready to buy. But, instead of buying what I like. I decide upon a threshold price to buy a particular amount. If I have cash on hand, I can put in a buy order for an amount slightly lower than what its trading for and get a really good price.
There might be five stocks I’m interested in trading slightly above the assigned value that I gave them. I might put in a buy order to the particular stock that is closest to the desired price. And then a few days or weeks later, perhaps another stock might be closer. By using this strategy of using assigned values and buy orders I can get a buying price roughly two or three percent lower, as well as a slightly higher selling price using selling orders.
Some people trade stocks with the desire to make a killing. I just am happy to get a good dividend and make between 4-12% on a fast trade. I might buy and sell in a few days, weeks or months and make this percent only to turn around and get another undervalued stock and try to do the same thing. The strategy so far is effective. The only problem is me — I’m not an expert investor. But, I’m sharpening my instincts daily and watching the market every morning tracking forty of my favorite stocks.