You Can’t Fall From the Basement. Or Can You?

Any successful investor or trader will agree that regardless of strategy or tactics, minimizing your risk allowsyou to live to fight another day. It also means potentially having the largest return risk profile. One way to do this (on the long side), is to buy securities at their multi-year lows. Finding equities that are trading at low absolute valuations, low relative valuations to their comparable companies and technically at the bottom of their chart, trading at or nearly as low as they have ever been. This often provides investment opportunities worthy of investigation. Such opportunities are a starting point to do deep fundamental (qualitative and quantitative) and technical analysis. These companies trading at their fundamental and technical lows, also provide another element to assist you to squeeze out risk: Time. The longer they are at their lows, the greater the opportunity to flush out any remaining fundamental and technical negatives. Time to: understand what happened previously; verify no shareholder class action suits or other material litigation; observe the completion of a large institution exiting the position (for a non sequitur reason); observe a management change, identify a change in business model, watch for compression in multiple of operating metrics; determine a change in regulatory environment; understand that it’s not a value trap; etc. The idea is to vaccinate your prospective investment against risk, utilizing time. Providing a compelling return-risk profile, so that you cant fall from the basement.
Revert to you in 2 weeks…
– David Baker
By |2019-04-15T13:44:06+00:00April 15th, 2019|blog|0 Comments