Bonta
01-19
It boils down to fundamentals. If the stock is trading 50-60% below valuation, it doesnt matter, as in the long run, there will be reversion to the mean. I am already used to holding stocks that trade 50-60% from purchase price. Will usually average down to bring down the cost. Overtime, they usually recover. However, there is a mark difference between 50% drop and 5x drop of 10%. 50% drop has a high probability of structural issues within the stock, as usually stocks with strong fundamentals even if they drop is in series of bad news. Structural issues will be very difficult to recover, as it implies damage to the fundamentals of the company. A review of the position will be urgently required.
How Much Pullback Are You Willing to Tolerate?
Do you agree with the statement: The higher the tolerance for pullback, the more likely to achieve higher returns? Which one do you pick? Enduring a single 50% pullback yields a 100% return; enduring ten 10% pullbacks results in a final gain of 159%.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • jllwang
    01-19
    jllwang
    Apply to PayPal and Alibaba?
    • Bonta
      Paypal i didnt monitor, so no comments there. Baba yes for me. Continuing to average down
  • neo26000
    01-19
    neo26000
    Does this method apply to TSLA? [Sly]
    • Bonta
      Depends on watever elon musk is cooking [Sly]
  • chocoee
    01-25
    chocoee
    Gotcha! Funny how we trust fundamentals, right? 😄 I agree, structural issues mean trouble.
  • Sok Peng
    01-21
    Sok Peng

    Great ariticle, would you like to share it?

  • Sonsonkok
    01-21
    Sonsonkok

    Great ariticle, would you like to share it?

  • Alex Puffin On Two Smokes
    01-21
    Alex Puffin On Two Smokes
    Great ariticle, would you like to share it?
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