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.