Monday, April 22, 2013


Have had several calls from friends in the past weeks about AAPL,  should I buy more, bail, hold, throw away my aapl products in disgust.  Short answer is I have no idea.  Friends that bought near the high feel stupid, those that bought well and were holding for  $1000 or whatever feel stupid for holding & then there is the friend who actually waits for stocks to correct before jumping in & wants to know if now is the time.  I personally own exactly 0 shares of AAPL.  I do own an IPAD, IPOD, &  IPHONES spread through my family.  Great products, great quality and I am generally happy to pay a premium for things that look cool & work well.

I make my money in day trading, its my bread & butter.  I simply have 0 edge in fundamental analysis and I can not compete with Warren Buffet and his ilk.  I know my limitations. So,  when I do buy something I buy it a a discount to hedge my disadvantage to those who do have the edge. I have 2 strategies in executing my long term portfolio.

Strategy 1:  When there is blood in the street,  the market has had the living day lights kicked out of it as in 07 or 01  or  97-98 (asian contagion) Or 94(tech meltdown) .  If its the market that has been killed,  I look to buy those stocks that have gone down the least while the market has gone down the most.  The idea is simple, when there are no sellers on the way down,  it will be easy to move up when the buyers come back.

Strategy 2:  If the market has not been killed,  but the stock has -like AAPL - then I want a 40-50 discount from the highs & a bis model I can somewhat understand. Examples:  IBM in 08,02-CSCO in 09 & 11, NOK in 08 (which did not work out), CAT in 2000 & 08, KO in 02 & 08,  SNY in 08, PFE in 02 & 08.  Point is,  if I think its a good company, I simply wait till its had the living crap kicked out of it and pick some up.  Usually it works out  I usually dont think i am picking the bottom.  2) I am not leveraging up as I do in day trading, again, no edge, so I am just putting cash to work.  It would take time and luck to ever get rich this way but it will  make my net worth grow nicely over time.

Thats it,  that has what has made me money over time.  I have had 1 total dud (NOK)  Everything else has shaken out nicely.  Its boring, the way long term investing should be. It even works for high flyers like DDD. I try to limit my picks to good, large companies and the occasional high flyer. I assume it could draw down against me more and I dont concentrate or leverage up.  I will usually sell puts on the positions I am entering  with the assumption that the stock will be put to me,  if not--"free money' (again-unleveraged-- I assume I will own the stock).

That brings us back to AAPL.  I went back and unscientifically looked at various corrections. It has rarely just turned and gone back up (it did once) but a quick glance reveals that it usually bases 4 to 6 months in a range before making any kind of significant move.   Gut tells me there is time to act.  I may start scaling into a  position via selling puts slowly over the next 6 months.  A little bit each month on down days. It wont be a concentrated position and I have no idea where the low will be.  Its down 40% and thats a good place to start nibbling.  I like the company's products so thats how I would handle it.

Here a a few charts of previous corrections.

Would appreciate any thoughts or feedback. 

Trading of securities, options and futures may not be suitable for everyone and involves the risk of losing part or all of your money. Commentaries are educational in nature and are designed to contribute to your general understanding of financial markets and technical analysis. Use it how you want and at your own risk. I am not a registered investment adviser. This information is a general publication that reflects my opinion and is not a specific recommendation to any one individual. You must consult your own broker or investment adviser for investment advice. Controlling risk through the use of protective stops is essential

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