UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev | Next
Author: TMFAdmiral Big gold star, 5000 posts Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2203  
Subject: Re: 1/3, 1/3, 1/3? Date: 7/15/2004 9:09 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 3
Hi Keith,

As one who frequently recommends this approach I'd describe it this way.

If I make a decision to buy because I think that a company is significantly undervalued I will usually split up the amount that I want to purchase into 2 or 3 separate purchases. I do not set a time limit for my purchases.

Example: Company XYZ is valued by me at $32 per share. It's selling at $24. That is at a 25% discount to my valuation. I tend to like a value approach so I often buy out of favor stocks. I have no way of knowing which way the stock price will go in the short term. It may fall further out of favor and drop below $20 or it may creep up towards my valuation. However I have a degree of confidence that over a period of time the market will recognize the value in XYZ.

I have $1,500 to invest (Scottrade at $7 per trade) so I invest $500 at $24 (actually 20 or 21 whole shares. Should the stock go down I can add more. At $20 I can add another 25 shares. In my case I might say that I won't buy over $25.60 as that's a 20% margin of safety on my $32 valuation

I might take months or years building up a position. Once a quarter I review the company to see if my valuation holds true.

I do have a rough rule of thumb that brokerage fees should not exceed 2% of the purchase price. So at $7 per trade that would be minimum $350.

Best Regards
Philip
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev | Next

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement