What is the best way to buy in a falling market? If you like a few stocks like BABA or INTC at current prices, but you think that the broad stock market has further to fall, what is the best approach? Buy now? Wait until it looks like the broad market has bottomed? Buy now but short the broad market? Other? What does experience teach?
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What is the best way to buy in a falling market? If you like a few stocks like BABA or INTC at current prices, but you think that the broad stock market has further to fall, what is the best approach? Buy now? Wait until it looks like the broad market has bottomed? Buy now but short the broad market? Other? What does experience teach?
I usually wait until Mungo posts his bottom detecter signal before jumping in; however I have been known to nibble ahead of this and almost pulled the trigger on some GOOG as it hit $2500.
tecmo
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The direction of the market movement means nothing - except to momentum investors, it should be said.
Nobody can tell you if the market will go up or down in the short term, no matter what they may pretend to know. Sometimes the optimism wins over pessimism and vice versa, it is fickle and emotion-driven.
Bottom line, a falling market is not necessarily a good buying opportunity, neither is a fallen but rising market (Mungo indicator). Nobody knows nothing.
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If your analysis supports the bullish case so strongly, just buy now. You won’t know when the bottom happens until sometime after the fact. You’ll feel so stupid if you want to buy the stock and end up having it run away from you.
That said, it’s hard to find bargains in the US stock market these days.
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Over time, particularly if you are not old, just be in the market in the stocks you choose hopefully at average (at least) prices/value. 51 years ago I was riding in a dune buggy, not driving, with friends and we crashed in a ditch. We quickly got to a hospital as one of our riders had gashed his head.
Nobody had any money but me, I had some cash in my wallet so I paid for my friends stitch-up and other medical costs, a total of $21…that’s twenty-once dollars.
Bet today that would be $2100, twenty-one hundred dollars. You don’t pay your future bills holding cash.
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100 times over 51 years, that’s an annual inflation rate of 9.5%
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Chomp. Can I ask what your top 5 holdings are outside of BRK? LTBH I assume.
100 times over 51 years, that’s an annual inflation rate of 9.5%
I think Chopin meant $210.
I think I’m of a similar age, and have compared prices today on many occasions from when I might have been at a similar age.
Just a slip of a finger.
Blackswanny:
Holdings…I was born with a silver spoon but…
My largest holding is AJ Gallagher. Our insurance brokerage firm, I owned 50.01%, merged with AJ Gallagher in 1994. 18% annual on that one since then. I bought the firm with inherited money and managed it for years. By the way…I made that decison based on Buffett’s comment that he made a mistake going into the underwriting side instead of brokerage. “Insurance brokerage is a tollbooth on the world economy” were Buffett’s words.
2 is Berkshire, I own 25 A’s. Inherited from Dad in 1975…took me several years to even know I owned that stock or who Buffett was. Dad had bought the shares from his family broker, a man I went to work for as a bank/insurance research analyst until he sold his firm.
3 is Norfolk Southern. My grandfather bought the shares and I got a tad of them via a couple of inheritances and 80 years later still own them.
4 Markel. My wife was a CPA in Richmond…everybody in Richmond in the financial sector knew the Markel boys, I’ve eaten with Tony many times at (closed now) De Fazio’s Restaurant in the West End.
5 Lowes. I’ve been selling Lowe’s recently to buy more Facebook. I bought a boat-load of Lowes when it came public because my family (I don’t have children…but a niece and nephew) owns a builders supply and mill work businesses and we all went nuts buying Lowe’s because we understood their business model and basic math.
Writing to entertain, nothing more. But time has been my friend.
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BABA too much of China risk and INTC is dealing with some structural issues. I would not touch them. There are many other interesting names. If you are looking for technology, look into SaaS space, there are companies that have over $1 B in balance sheet, growing revenues over 30% to 40%, and have price to sales < 10. I have posted few ideas in various places.
c3.ai is an enterprise AI CRM company. Started by Tom Siebel, who started Siebel systems CRM company that he sold to Oracle. They have over $1 B in balance sheet and guiding $250 M sales. Have a decent strategy, their RPO is misleading, growth faltered in the last quarter, SGA is over 100% in last quarter. I think they are revamping their salesforce and may take couple of quarters to get their revenue growth back on track.
In any case at $25, it presents an interesting opportunity. If you don’t like today’s price, sell $15 Jan 23 put, for $2, either you get a net price of $13 (market cap of $1.4 B, which is cash+1x sales) or 13% return on cash secured put. Again, this is just one of the opportunities I am looking at, do your own due diligence.
IN any case, there is a massive sell off happened beneath the surface on growth names. Indexes are not telling you the story. You can do much better than BABA and INTC. BTW, I own both. 
By the way Blackswanny…I can tell some stories. Not too many today are interested, but by accident I got involved or invested with some interesting types of people. It all began because my dad’s broker was the type of man who understood people like Warren Buffett. It wasn’t common because most people just chased things, Saul’s board isn’t a new concept in other words, growth and fast profits always lure, the bigger the risk and the higher the payoff…
But anyway Markel Insurance owned Markel Trucking Insurance and they weren’t doing well with it. So they sold it to Prem Watsa’s Fairfax Financial. I bought a tad of Fairfax on the Toronto exchange (it was at half book value) and have held it, of course doing well then doing poorly. But along the way Prem and his bunch bought and owned 40-50% (can’t remember percentage) of an insurance broker called Hub Group. Hub was traded on the Toronto exchange but they decided to list on the NYSE and when they did? Oh my!
Hub was growing profits in a bad year at 15% annual and in a good year 20%. And you could buy the stock all day long at less than 8 times earnings, often at 6 times! I bought every share I could until I had nothing to spend.
Fairfax, the largest shareholder, wanted to sell their stock and so Hub was bought out. I made 5 times my money, and it was a lot of money for me, in a year and a half!
Incredible stuff happened. I used to chant about this stock on the old Berkshire board. Couldn’t gain any interest from anyone.
Markel, Fairfax, they are all tied (for me) to Berkshire.
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Blackswanny, last mention for the night. Pretty sure that my Berkshire stock was worth less than $2000 when I inherited it.
Interesting… Mungeresque in style then and very successful with it. Best.
No silver spoon for me, but I’ve grown my portfolio from nothing to 7 figures in a decade after having to put down a hefty house deposit, paying off student loans and buying furniture using interest free credit cards.
Looking forward I’ve trimmed Brky(still 50%) and I’ve recently been influenced by the thinking of Pabrai, Spier, Miller in terms of looking at value differently and looking companies like Amazon, FB etc, (asset light, little debt, intrinsic valuations, global growth, management and capital allocation, moats)
My other 50% is in Alibaba, Tencent, Baidu and FB. I’ve the same mentality to just sit on my hands and let them roll, see where we are in 15 years.
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Blackswanny I think you are very likely investing Mungeresque yourself. Taxes logically prevent some change, but I do change very slowly just to stay with it and alive. Your choices are ones I’m making for what that’s worth.
The UK based brokers that offer tax wrappers eg ISA’S SIPPs etc are uncompetitive on FX fees typically min 0.5% for larger transactions and don’t offer currency conversion into dollars etc.
Archaic and a cartel IMO (I use AJ Bell) I therefore try and keep transactions to a minimum and invest for the very long term. It’s time they uptheir game to be competitive with IB.
I don’t have any domestic share holdings and consider the UK a bit of basket case economically. The US and China are where it’s at and that incurs fees.
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I don’t have any domestic share holdings and consider the UK a bit of basket case economically. The US and China are where it’s at and that incurs fees.
I just read this from Research Affiliates. It is almost a year old.
https://www.researchaffiliates.com/publications/articles/824…
While we still like our last named trade of the decade, emerging markets value stocks, the UK equity market, and UK value stocks in particular, are now even cheaper.
With the final Brexit deal done and the rapid COVID vaccination rate in the United Kingdom, the outlook for UK value is extremely promising, enough for a “trade of the decade.”
I don’t know how it has played out so far. I am a Brit, but haven’t lived there in decades, and don’t follow the UK markets.
Blackswanny,
If you’re in the UK set up a brokerage account at Schwab via their London office. Then you don’t get the ridiculous forex fees every time you trade. When you want to convert dollars into Sterling then at that point you’ll have to hunt around for the best conversion rate but the options are improving in both quality and quantity.
You can also try Fidelity - the US side not the UK though maybe you can get a dollar account via their UK business.
If all your money is in ISAs and SIPPs then I doubt that Schwab and Fidelity US can help. But if you’re a long term buy and hold of BRK then a regular brokerage account should be fine.
There may be others available to you. AJ Bell, Hargreaves etc are going to have to improve their services and/or reduce fees if they want to keep their dollar business.
Hope that helps.
Re the UK I’ve held some stocks like Tesco and Glaxo before. I sometimes trade property stocks on price with discount to net assets when they crop up. (Traded British Land, Capco, Hammerson and Vistry in the last few years) that’s my sector so I have a bit of an antennae for it.
We’ve nothing comparable to your Googles, Facebook and Amazons though…
Do you have a link to Fidelity fx charges?, can’t find them anywhere. I phoned them up, they put me on hold and hung up on me. Good start