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TLStockPicks (94.71)




May 29, 2008 – Comments (1) | RELATED TICKERS: PRAA

Yes, I am indeed welcoming myself to CAPS.  I'm actually not new; I have been using CAPS with another name to test out some speculative calls, mixed in with some solid stocks that I firmly believed in.  The results were... well... mixed. 

Now, with my new incarnation, I aim to make both long-term "investment" calls and short-term "swing trade" calls that I feel strongly about.  I will mostly make outperform calls, but I will award a thumbs-down to companies that I find just-too-tempting.  I won't short noname, sure death bulletin board companies though, as that is just cheap.  But if you do see me short a stock, I plan to see that short through until the company is bankrupt or acquired at a much lower price.

I aim for my blog and pick-rationales to be interesting, helpful, and insightful... though not as insightful as what you'd get from guys like Eldrehad.  Yes, I repeat, I AIM to be NOT as insightful as Eldrehad.  I just don't have the stamina to write a book on each of my calls.  But I WILL write a short chapter for each pick.  And sometimes it will contain numbers and fundamental analysis.  Sometimes, like with my first pick (long-term outperform on PRAA) it will just contain boring text--citing an arbitrary number for forward P/E, for instance, is just unneccessary when one's argument is simply that E will be see solid growth that will hopefully beat projections.

So, a little bit about my philosophies: My long term philosophy is of course to find 1) companies that are undervalued, or 2) companies where I believe their future earnings are being underestimated.  And many would argue that 2 falls under 1.  Long term investing sure is boring.

As for my short term philosophies: well, for the last few years, I've tried to learn every strategy I could about stock trading, including strategies that I doubted, such as chart-reading, candlestick analysis, etc.  Not because I was inclined to use them. Then why? Because the stock market, especially short-term trading, is indeed a game of wits.  Merely understanding the motivations behind others' trades can give you insight as to how the market will move in the short term.  I, the little individual trader, will be hard pressed to manipulate stock prices up and down the way professional traders and masses of similarly-minded people can, and therefore I have to play within the rules and boundaries set by them... and if the rules they play by are derived from looking at chart technicals, I think it'd be important to at least acknowledge the technicals.

For instance (and pardon the oversimplification), if stock XYZ was mainly followed by 9 active traders, and their strategy was to buy when the price hit a "support level", and sell upon hitting a "resistance level", imagine the results if a new trader comes in and ignores the technical strategy being played.  If these traders all owned some shares, there would be the 9 traders' asks at the resistance level.  The new trader comes in and ends up buying some shares at the ask.  Now, the only bid orders come from the 9 traders at the lower support level.  In the short term, absent a new trader entering the game, this new trader is stuck his shares that he bought at the ask price, and can only liquidate at the lower bid price.

Yes, I know that this example raises all sorts of issues, such as "well how did the resistance/support levels get established if it's so thinly traded?"  I don't know... use your imagination.  The point is that, being the little investor, you usually have to play by the rules--and when that happens, you should know the rules.  And, well, if you find a good time to break the rules--you should still know the rules.

1 Comments – Post Your Own

#1) On May 29, 2008 at 3:41 PM, RonChapmanJr (29.82) wrote:

good luck and have fun.  there is some stiff competition here.  :)

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