Wayne A. Thorp, CFA is a vice president and the senior financial analyst at AAII and former editor of Computerized Investing. Follow him on Twitter at @WayneTAAII.


Discussion

David from PA posted over 5 years ago:

Mr. Thorp sounds like an economist; " If it's not this, it could be that, or it could be something else, or maybe something else, etc., etc." I was so overloaded with information that by the end of Thorp's article I thought my head was going to explode.
I liked the guy who runs Investor's Business Daily: If it goes down 8-10%, don't screw around, sell it. There are plenty of other good stocks out there. Buy one of them.


Dimitri from NJ posted over 5 years ago:

David, you seem to be advocating a rather robotic action policy. What if that 8-10% decline presents a great buying opportunity (e.g. BP during the Gulf 'disaster')? Thorp does point out the analytical aspects one could follow.
On the other hand...you may be better off doing it your way!


John from OH posted over 5 years ago:

To reinforce Dimitri's comment, I believe BP Stock dipped briefly to $30 a share immediately after the Gulf disaster. But within six weeks, BP Stock had recovered to $45 per share - a 50% gain. Of course it's easy to be a 'Monday Morning Quarterback.'

Another recent example of a respected company's sudden stock plummet is Cummins Industries (CMI). Immediately after a report stating that CMI's accounting standards were more Questionable(?) than 90% of all companies, the stock took quite a hit. But CMI stock price has strongly recovered, (regardless of CMI acct'g standards).

I'm beginning to think that when a respected Industrial company 'stumbles' - it may represent a Great Buying Opportunity.


J from PA posted over 5 years ago:

Thanks Wayne Thorpe. You must be right be cause you advocate just what I am already doing. Still, it's nice to be reassured.


Douglas Ferguson from NC posted about 1 year ago:

Greaat overview. Good reference to use in making a buy or sell checklist. Many times the window of opportunity is very narrow and you have to seize the moment. The top of greed and the bottom of fear are difficult to determine. Many of the factors discussed by Mr Thorp are useful when pressing the buttom. One must be knowledgeable and prepared when these momnets present themselves to us individual investors. Good hunting in 2015!


Chris from OH posted 8 months ago:

Technical analysis is a lot quicker - Who has time to commit to this level of analysis.


Wayne Thorp from IL posted 8 months ago:

@Chris,

If technical analysis works for you, that's great. If you made a long(er)-term stock purchase based on fundamentals, though, I do not agree that basing your sells on technical analysis is the best route. Technical analysis, in my opinion, is useful to help time your buy or sell decision, once the fundamentals have pointed to a buy or sell.


Garry from Georgia posted 8 months ago:

As always there is no perfect system. While you give two stocks that recovered niceley; I suggest there are more examples of stocks that don't, at least in a reasonable time. Once sold does not stop one from repurchasing. Sometimes at a better price, sometimes giving up a few percent of the gain. Consider it insurance against the risk which can be unreasonable and even unjustified.

One more major point, Information distribution is not ubiquitous, timely, or always reliable.


Garry from Georgia posted 8 months ago:

Check out Lee Freeman-shor's article, "Being Wrong and Still Making Money".

http://www.aaii.com/authors/lee-freeman-shor


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