Cathie Wood has once again added AMD to her portfolio. So, should we follow her lead or not?
This year, AMD has performed quite well, but this aligns with last year’s expectations. From last year through March this year, AMD experienced a strong rally. However, since April, the stock has undergone a nine-month-long correction and is now approaching its yearly lows.
Regarding Cathie Wood’s entry, the current price level is significantly low, with a forward price-to-earnings ratio of under 25. Without requiring exceptional growth, AMD has 30-40% upside potential, and given the AI boom's pace, its prospects for next year look even brighter, with up to 50% growth potential. With a prolonged correction, a low valuation, and solid performance (though Wall Street had higher expectations), it makes sense for Cathie Wood to step in. Importantly, large funds and institutions tend to enter early, engaging in left-side trading to secure enough shares, as right-side trading can be more reactive and less advantageous.
For small and medium-sized investors like us, we must act based on practical realities. AMD's last correction lasted 11 months, and using symmetrical patterns, this one might follow a similar trajectory. While the bottom could arrive soon, it’s hard to pinpoint whether it will be in a month or two, though exceeding two months seems unlikely.
From an investment strategy perspective, we typically avoid entering a downward-trending stock prematurely, especially during a long-term correction. Otherwise, we risk repeatedly falling into the trap of bottom-fishing in a downtrend.
After a nine-month correction, does it matter if we wait another two months? The risk is already significantly reduced. By observing clear bottoming signals and then making a decisive move, we avoid acting prematurely, which is a critical difference between small investors and institutional ones.
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