Fundamental Reasons why it's safe to hold your stocks
I get asked a lot by friends / co-workers who tell me to take some profits on my Whirlpool Stock or FORD or any stock that has gone up so high the RSI value is criticially overbought.
FORD (F) RSI is over 78% right now... 70% symbolizes criticially overbought status.
Those who look at the market from a tiny, tiny, short term situation all are shouting "We are at or near a top! 15-20% pullback is to be expected!! Equity markets are going to crash soon! Sell Sell Sell Profit Take Now while you still can!!"
Well.. If I survived "Armageddon 2008" then I sure as heck can survive a much needed, desperately overdue, pullback in the equities markets.
So, if the markets are about to pullback why Hold? Why not join in on the obvious profit taking that is going to happen soon? Won't FORD make a big mistake and have its share price go back to $1.01 and I'll have ZERO profits to enjoy?
Here's why you hold:
1) The future is impossible to predict so profit taking tomorrow might be a full month too early.... Or it might just be a foolish mistake as the market keeps doing it's thing for years to come.
Worse still, you might be TOO LATE and witness as your share price drops 5+% lower right at the opening bell Monday.
2) Those who HOLD will be doing as I have been doing... Putting together some cash on the sidelines in a savings account or money market, accumulating as much as I can, for the pull back if it is to come. That way I can focus on stock piling shares for any top quality company whose share price might get over sold during any kind of prolonged pullback or profit taking session.
FORD goes back to $1.01? Great... I'm a buyer now at those levels.
3) Worrying about share prices in the short term can lead to forgetting the fundamental startegy of focusing on your investments long term fundamentals and not the short term price action.
No one can predict what price (KO) Coca-Cola for example will sell at on August 3rd, 2021. If you can predict that then what are the lottery numbers for this week's Michigan Lotto?
No... I'd don't worry about share prices UNLESS I find some company whose share price and fundamentals I like better. I do a trade out of 1 stock into a stock I think I like even better.
I ditched (MSM) and poured some of the cash straight into (F) FORD and at (FRPT)'s absolute bottom price during that share price sell-off. Given how (F) has been on FIRE! and (FRPT) has yet to trade anywhere close to what I paid for it at $4.57 a share, I guess I made the right move....
I don't worry about short term share prices unless the catalysts that interest me as an investor somehow crash and burn.
4) While most investors put their cash at 1 or 2 particular catalysts... I spend my time as a BUY and HOLD investor always looking for "THE NEXT" catalyst.
I am confident that either Starcraft 2 or Diablo III's release in stores will propel the share price skyward for (ATVI) a company I invest in. I am also confident that after the initial blast upward the momentum will stop and the share price will come right back down. There will be plenty of "GLOATERS" and "BOASTERS" telling those who never took a single penny's profit that they missed the boat and now are on a sinking ship.
I know a lot of (ATVI) investors are thinking... "I'd better sell and take my profits on the Release Date or perhaps 1 week behind the release date of Starcraft II!"
That's fine for a short term strategy..... But Varchild2008 has alraedy identified something that could potentially be FAR BETTER than either Starcraft II or Diablo III.
I'm looking for "Prototype" to possibly become a franchise and possibly rival Grand Theft Auto if the company provides enough incentive to buy the next version(s) of the game.
I also see Blizzard's interest to do more MMOs (whether subscriber based or whether they switch to a FREE subscription model based on buying "things" when you play the game to enhance your experience). I see these as reasons to believe that the highest share price ATVI reaches off the Starcraft II or Diablo III video game release dates will pale in comparison to the highest share price ATVI reaches in the year 2030 (which is my target retirement year).
DISCLOSURE: I own shares in ATVI, F, FRPT, and used to have shares in MSM.