When you lose 25% on a stock, do you want to buy more or even buy at the same initial dollar amount (i.e. double down)? Most likely the advice is not but there are some exceptions. Find out why it is down and is there any reason to recover. Here are some of my actual experience and my reasons.
* I would average down on CAT, or even double down on CAT. I just bought the company and it lost 10%. CAT does not have a good audience of shorters. It will recover when the economy improves. At this price and P/E (about $75), it is hitting bottom to me, esp. the big boys are selling like hot cakes.
You need to be patient as you're swimming against the tide. Wait for 2 to 3 years.
* Average down is about timing. Take CROX several years ago as an example. CROX had a good audience of shorters and it suffered from temporary setbacks to me. You would lose another 50% at its low. However, after one year, it shot up to over 200% gain from the bottom. When to double down is important. Stay away when the downward momentum is high.
* You need to make sure the fundamentals are there and it is just a temporary setback. When the stock has a potential to go to 0 with fraud or a lawsuit pending, it would be a fool's game to average down.
* Averaging down on BAK is not wise when it is losing from $50 several years ago to about $8 today. When it was $25, it was still not a good price as it was still a falling knife with the problem unresolved.
* Averaging down just because you love a company is not rational.
So, there is no Yes and no No answer. Your success requires you to do some homework and sometimes some luck.
Thursday, July 12, 2012
Sell Lockheed (to China)
We have a hard time to find a worthy enemy - China and Russia are not even combined.
Best deal of the century: Sell Lockheed to the highest bidder (it would be China). I know what you're thinking, but will China be stupid enough to be our enemy after Russia and many smaller ones?
The last war is pressing a button to destroy the world many times over. We do not need the carrier with dual nuclear generators.
What did we gain in Vietnam War, the two Middle East wars... in monetary value and decrease in human suffering? Are Vietnamese living worse than before the war?
http://bit.ly/Nrz46p
Best deal of the century: Sell Lockheed to the highest bidder (it would be China). I know what you're thinking, but will China be stupid enough to be our enemy after Russia and many smaller ones?
The last war is pressing a button to destroy the world many times over. We do not need the carrier with dual nuclear generators.
What did we gain in Vietnam War, the two Middle East wars... in monetary value and decrease in human suffering? Are Vietnamese living worse than before the war?
http://bit.ly/Nrz46p
CAT
Talking to my friend Crozz on CAT.
You may need to hold CAT longer like two years (after 2014) when the economy starts to recover. Even with the present metrics, it looks great. The mining and construction businesses are slowing down but they will come back after the 2007 recession.
I use a scoring system. From 5/7/12: It scores at 24 for short term and 17 for long-term. I think the reverse is true (i.e. 17 for short term) - with 15 is a buy.
Value Line indicates annualized 16% return after 3 years (8% is good for me.) Fidelity has 9.5 out of 10 from analysts. 17% of its stock price is cash. It is 98% cheaper compared to its 5-year average P/E.
The only negative point besides the global economy is its high debt / market capital. It is quite normal in its industry.
On that day of the analysis, the stock price is 97.19 and now is 79.14. I bought it two times in between these prices. Is it a gem or will it fall further? Only time can tell.
You may need to hold CAT longer like two years (after 2014) when the economy starts to recover. Even with the present metrics, it looks great. The mining and construction businesses are slowing down but they will come back after the 2007 recession.
I use a scoring system. From 5/7/12: It scores at 24 for short term and 17 for long-term. I think the reverse is true (i.e. 17 for short term) - with 15 is a buy.
Value Line indicates annualized 16% return after 3 years (8% is good for me.) Fidelity has 9.5 out of 10 from analysts. 17% of its stock price is cash. It is 98% cheaper compared to its 5-year average P/E.
The only negative point besides the global economy is its high debt / market capital. It is quite normal in its industry.
On that day of the analysis, the stock price is 97.19 and now is 79.14. I bought it two times in between these prices. Is it a gem or will it fall further? Only time can tell.
Tuesday, July 10, 2012
Why middle class sucks
First I have to proclaim I'm a not a member of any political party and any religion. In other words, I am not biased and I do not have to stick to the view of any political party or religion.
We have to ensure the middle class should have better medical care than the poor as they pay more for their share.
Can anyone explain:
1. The poor get 100% free health care and prescription (say in MA), while the middle class like me are very careful to decide whether to see a doctor or not. I have to pay good money even after the insurance.
2. The poor can go to nursing home free and we only go when we have no choice as it is very expensive.
We have to ensure the middle class should have better medical care than the poor as they pay more for their share.
Can anyone explain:
1. The poor get 100% free health care and prescription (say in MA), while the middle class like me are very careful to decide whether to see a doctor or not. I have to pay good money even after the insurance.
2. The poor can go to nursing home free and we only go when we have no choice as it is very expensive.
Thursday, July 5, 2012
Can China say no to US?
Japan can say no and should say so to US in last twenty years. Now China can and has proven it can without being the puppet of US.
US used to play China card against Russia 30 years ago and now may play India card against China. Oue foreign policy should not be a game of cards. We cannot be the world leader / policeman all the time. The glorious days of either my friend or my enemy has long gone.
US used to play China card against Russia 30 years ago and now may play India card against China. Oue foreign policy should not be a game of cards. We cannot be the world leader / policeman all the time. The glorious days of either my friend or my enemy has long gone.
Wednesday, July 4, 2012
Illegal workers
Well, it is a double-edged sword.
If you've not worked in the farm, you may not know how tough farm work is. The poor natives here prefer to collect the social welfare than working. We have to cut down these entitlements and force (encourage is a better word) them to work before we can shut out the illegals.
http://bit.ly/LxrdSg
To me, preventing illegals from coming is quite easy. We do not need all the wires, sophisticated devices and manpower. You do not want to penalize the illegals (they come here for better economical reasons that I do not blame them), but penalize the employers. With better regulations like requiring work permits and the employers paying the expenses including health care, temporary works could benefit the society.
If you've not worked in the farm, you may not know how tough farm work is. The poor natives here prefer to collect the social welfare than working. We have to cut down these entitlements and force (encourage is a better word) them to work before we can shut out the illegals.
http://bit.ly/LxrdSg
To me, preventing illegals from coming is quite easy. We do not need all the wires, sophisticated devices and manpower. You do not want to penalize the illegals (they come here for better economical reasons that I do not blame them), but penalize the employers. With better regulations like requiring work permits and the employers paying the expenses including health care, temporary works could benefit the society.
Tuesday, July 3, 2012
Politcal systems
Capitalist-Socialist is a better term to describe China's political system, However, China is also ruled by a single party with about a handful of rulers. It is some how authoritarian.
Communism evenly shares food and other stuffs among its citizens. So, it encourages laziness and China today does not look like communism but really looks like capitalism where you die if you do not work.
Socialism is in between capitalism and communism. Democracy could lead to socialism, which in turn could lead to self destruction like Greece.
What do we call US? Socialist-Democracy? We have generous welfare and free speech.
Democracy may not work for countries with low education. It could and have led to corruption as indicated in many Asian countries, present or past.
We cannot weigh the same vote for an educated citizen and a bum. We can have an IQ meter in the vote booth. Your tax return for last year will be handy too as we should not allow representation without taxation. Quite extreme even for me but just a thought. :)
Communism evenly shares food and other stuffs among its citizens. So, it encourages laziness and China today does not look like communism but really looks like capitalism where you die if you do not work.
Socialism is in between capitalism and communism. Democracy could lead to socialism, which in turn could lead to self destruction like Greece.
What do we call US? Socialist-Democracy? We have generous welfare and free speech.
Democracy may not work for countries with low education. It could and have led to corruption as indicated in many Asian countries, present or past.
We cannot weigh the same vote for an educated citizen and a bum. We can have an IQ meter in the vote booth. Your tax return for last year will be handy too as we should not allow representation without taxation. Quite extreme even for me but just a thought. :)
Subscribe to:
Posts (Atom)