Looked at GH yesterday. Thought I should open a postion. Looked at the price and the price action. Felt I might get in at 69.50. It was at 71.50 up 4.
Today it is trading at 84.
Cheapness strikes again!
Qazulight
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Looked at GH yesterday. Thought I should open a postion. Looked at the price and the price action. Felt I might get in at 69.50. It was at 71.50 up 4.
Today it is trading at 84. Cheapness strikes again! Qazulight
Hi Qazulight, That’s what I keep preaching about. I had sold out at $41 because of the risk of their big study not panning out. When I read the results of their study I said “This is it!” The price had shot up to $71 almost overnight, but I didn’t hesitate bought all I could around that price. When for a day or two the price settled back to $67, I added a little more. I bought some more Monday or Tuesday at $70. It closed yesterday before earnings release at $74. Now with more details in the conference call last night, the price is currently up another 27% at $94.65.
You looked at $71.50 and felt it was too expensive and didn’t buy. You looked today at $84 and felt it was too expensive and didn’t buy. I looked at it today and bought more at $84 ($83.75 actually). I added a tiny bit more at $87.90. The shares I bought at $83.75 this morning are currently up 13%, this afternoon. Sure the price may come back later, but this is going to be a behemoth, it appears.
Geez Qaz, If you see it, and want it, BUY the damn thing. Don’t miss a company you want to try to save 2% when you are buying it because it’s going to go up. If you had taken it yesterday at $71.50 you’d have a 32% profit right now. Next day!
Best,
Saul
51 Likes
Great post Saul. Another one I’m saving because this logic is so important.
1 Like
Great post Saul.
But…I agree price doesn’t matter today, but…
My question is how big is this market? Where do you see GH’s potential revenues going forward.
I’m not sure this has been addressed, I need to go back and look, but are there estimates on how large this market can get?
Right now I think GHs market cap is 7 billion. How big can that number get.
10 billion, 14 billion, 25 billion?
Chris
2 Likes
…Maybe add that post to the “Knowledgebase”, Saul?
– This…is the MaineReason
Hi MaineReason,
It’s pretty much always been there. 
## What is my Buying Policy?
--------------------------------------------------------
What is my buying policy? I actually don’t have a fixed buying policy. That means you can rule out cost-averaging over a predetermined time. I never do that.
You can also rule out: “I am tempted to just start waiting a bit longer until the right opportunity arrives.” If I like a stock enough to take a position, I will always take at least a starter position, and figure on adding later. I never wait for the “right opportunity” to take a starting position. I do add to a stock when it goes down for no reason on an opportunistic basis, but you can’t take that as a rule, as some of my most profitable deals ever I kept adding on the way up, instead of on the way down. (If I start buying at $25, adding at $28 or $31 might seem expensive, but when it gets to $75 or $120 the difference between $25 and $28 will seem negligible. Also if it’s at $25 and I wait for $22, to buy at a “cheaper price,” I’ll really kick myself when it’s at $120 and I never got in because of waiting for a cheaper price.)
As you can see, there’s no clear rule, but I was able to rule out two approaches (buying thirds at predetermined times and waiting for a cheaper price to add).
Remember you’re not locked in. Not infrequently I decide my initial purchase was a mistake, I don’t really have faith in this stock, and I sell out at a small profit or loss.
On the other hand, if I’m really excited about a stock I’ll take a substantial position right from the start. I’m more likely to do that with a MF recommendation (because there’s a board with other people following it that I can use for a resource) than with a little stock I found myself. But I occasionally change my mind on those too.
Since I’m almost always nearly 100% invested, I often don’t have the money to take a full position all at once. If it’s something I absolutely fall in love with, I’ll jump into it with whatever money I have available, and will likely trim some large positions for more cash. If I’m not sure, I’ll take a small position to put it on my radar. I then may add more as money becomes available, often building to a “full” position, which is an average-size position, not an oversize position (which stocks have to grow into). I may do this fairly rapidly, or if I’m building two or three new positions I may have to split available funds between them. Or as I get more familiar with the stock that I’ve taken a starter position in, I may say to myself, “This is stupid, it’s not my kind of stock”, and sell out of my starter position. That does happen.
Never miss getting into a stock because you are waiting to buy it cheaper. The decision is whether you want to invest in it or not. Once you decide, take a starter position, at least. Don’t wait around for a slightly better price.
Price anchoring is a BIG mistake. Treat a company as if you had just encountered it, and then decide, based on its current earnings growth, PE ratio, prospects, price, etc, whether you want to buy it now. Where the stock price was in the past is irrelevant. You can’t go back and buy it at that cheaper price where it was two months ago.
When the whole market is falling, putting more money into your favorites usually works out very well in the end. On the other hand, when one stock is falling off a cliff in a rising market, it usually means that something is very wrong. Putting more and more money into it on the way down is usually very dangerous, and a way to lose a lot of money.
If the stock is going up, it generally means the hypothesis upon which you bought the stock is working out the way you hoped. The business is doing well, revenue, earnings, cash flow, and all the rest are going up. I’m glad to add to an idea that is working out. If it’s going up wildly on just hype I won’t add.
There are others who like to “average down,” which sounds good, but it often means buying an idea that isn’t working out (watering the weeds, making excuses for bad news). Oh, sure, if my original purchase was at $73, and a week later it’s at $71 because the market is down a little, I might add a little. That’s just random noise. But if they come out with really bad news or a bad report and the price is dropping like a rock, I’m not one to say, “Oh, they’ll get it figured out. I’ll buy at this cheaper value.”
I saw the following question on a MF board and thought it typified what I wouldn’t do. Here’s the question: “With the disappointing XYZ results, is XYZ a buying opportunity?”
I didn’t know anything about XYZ, nor did I read their results, but the general idea of buying more of a company because it had bad results and the price fell, and thinking you are getting a bargain seems foolish to me.
There are exceptions: If a stock, after reporting excellent earnings, falls off a cliff because it didn’t meet estimates, or some such nonsense, but I know what the news was, I read the conference call, and I know there is nothing wrong, at least that I could see, I don’t hesitate to add. (Maybe some hedge fund got a margin call on another stock and had to raise cash in a hurry and so had to liquidate my stock at whatever price they could get. Who knows? Irrational things happen.)
You can’t buy all the great stocks! (unless you run a big index fund yourself). Some stocks you pass on will go up. It’s guaranteed! Personally I don’t even think about them. I just care about how the ones I bought are doing. (THIS IS A KEY POINT, READ IT CAREFULLY!)
Where do I get my stock ideas? Many of my stocks were MF picks (mostly RB, actually), although I had invested in several of them before they were picked by MF. As I indicated above, I really prefer to invest in MF picks because the discussion boards and continuing coverage is incredibly important to me.
Best,
Matt
14 Likes
“…how big is this market?”
Huge. Think everyone who goes in with a strange feeling, lump, or whatever. Anything other than a sore throat or broken leg, guess what he’s going to order? A blood draw, quick, easy, and cheap. And it’ll get cheaper and more available. If the doc determines a person has cancer, they’ll continue using the test to monitor progress of treatment. Eventually, it may become very common, given how how pervasive cancer is. And, as Saul said, the insurance companies will love it, and we all know they rule the world.
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Only question is here is if you believe this company will be monopoly in this field to justify the valuation.
A blood draw, quick, easy, and cheap. And it’ll get cheaper and more available.
Why does that sound so much like Theranos?
Andy
3 Likes
I am wary of the specific accolades to Saul’s post on the basis of it being ‘logical’. His reaction may of course be completely logical but nothing in his post alone made it so.
In this situation, I have always found it more illuminating to ask ‘What price would you not pay?’. There will be a price that Saul would not have paid, one (clearly much higher) which would have offended his well-tuned sense of risk and reward.
Be careful folks. He will have worked it out. Did you?
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Since I typed that after the original posts, he and others have done this in ballpark terms, which is very interesting to read.