Sunday, November 20, 2016
Buying 52-week low stocks?
Morning Sunday ... they played well and could score few goals ... but at least ONE goal to win the game? Draw is not good enough as rival teams won their games. As long as they are playing well, they should have good chance of staying at top 4.
Let me share the FIVE pointers about the 52-week low strategy.
#1 : Do they have a durable competitive advantage?
#2 : What is the purchase value of the company relative to its free cash flow?
#3 : What's the return on invested capital of the company?
#4 : Can it pay off its long-term debt quickly with free cash flow?
#5 : Finally, is it trading close to its 52-week low?
While many O&G counters are trading at 52-week low, they do not satisfied all the 5 criteria above and in fact, only satifying the least important point #5. The order of the sequence is important too.
This is weekly chart of AIRPORT ... yes, it dived 50% from the peak and rebounded. Whether you want to TALK about fibonacci retracement of 50% support or what have you in technical, would you BUY (don't talk ... talk is cheap) around RM4.30 level? It rebounded 50% up up ... what a good return. HOW DO YOU KNOW?
It's 52-week low is around RM5 now. WILL YOU BUY at RM5?
Most of the time, when stocks at 52-week low ....not many interested in them OR they are stuck inside them. Notice that ... suddenly the whole market bearish of them and will give us REASONS to not liking them. HOW do we to be a contrarian ... and do 'stupid' decision on buying into 52-week low?
During crash ... most of the stocks will be trading at 52-week low. Don't worry about the target-prices by IBs ... they will downgrade them ... hehe. Don't worry about forums too as no one will talk about them. They won't tell you that they are stuck inside, will they? No way. Don't bother to ask sifus/gurus as during crash ... most will be hiding and no longer interested to answer your VALID questions.
Buying 52-week low stocks? Sure?? How about HISTORICAL low price stocks? Would you be buying?
These are in my mind as I m reading the 52-week low formula book. Being contrarian is one of those 'easier said than done' as not many on your side.
Let me digest few more pages of the book's content and share little details in the book-sharing session (have not planned).
Have nice weekend as market should recover next week ... no incidents during Bersih reported. Good.