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Author: TMFThump Big gold star, 5000 posts Old School Fool Ticker Guide Home Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1172  
Subject: Re: Buying in Thirds Date: 5/23/2011 3:14 PM
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One thing I would add to this discussion on anchoring and purchasing additional shares for stocks that continue to rise is to not focus solely on price. Note some of the measures of valuation like P/E or P/S at the time of your original purchase. You will frequently find that a stock has risen 20% (just to pick a number) from your initial position but that it's valuation remains comparable. If earnings and revenue have also increased by 20% over the same period, then you are getting equal value for the purchase even though the price is higher.

That's what TMF1000 is looking at when he talks about picking up shares at better valuations. If two weeks after your original purchase, nothing has happened (like an earnings report), and the stock drops 10% it's pretty easy to see the better valuation. However, adding a stock 6 months or a year later may be just as attractive, but you might have to look beyond the price to see it.

Doug
SA Home Fool
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