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Market Intelligence

The Name Of The Game (Buy Low, Sell High)

Seaver Wang | September 28, 2014

Buy low. Sell High. It’s that simple. Really; it is, yet I know few people who do it. Consider this. Stocks are usually not on the average person’s mind. If the subject of stocks came up at a cocktail party, its’ probably because someone is bragging about how much money they made, not how much they lost. Most investors get their information from television, the newspaper or the internet. All these mediums reach millions if not BILLIONS of viewers. Trust me, by the time you read that article, thousands are way ahead of you and the stock price will reflect that news. If a company is healthy and has a solid and predictable future, it’s probably best to buy when it hits a little turbulence. No company executes their plans perfectly. That’s when you pounce and buy low, AFTER people have sold off because of short-term fears. And when things look perfect for too long, then maybe taking some profits is not a bad idea. I often like to mention how my father is a successful investor because of the simple concept of buying low and selling high. No, he doesn’t read annual reports, he doesn’t watch CNBC, and he doesn’t trade very much. Back in the early 1980s he purchased shares of a few promising drug companies (not biotech) and bought more on dips (buying low or lower). The dividends alone from those companies are now higher than the average per capita income in the U.S.A. I would call that successful.
What do we look for at KFS? Here’s a hypothetical illustration of our methodology. Usually, we look for stocks that have done nothing lately. It hasn’t been in the news or maybe even had some bad press about it. Expectations are pretty low, and that’s how we like it. If it reports mediocre quarterly results, no big deal. That’s what was expected and the stock doesn’t move much. But how many public companies do you know would tolerate a stagnant share price? Very few, so new products are launched, the old incompetent CEO is replaced, they start advertising again, etc. Suddenly, the company is in the news again, they report results that are better than those lowly expectations and it is relevant again…. And the stock moves up. That is the theory, at least.

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