No. of Recommendations: 17
Bozob asked what I thought was an interesting question in the wonderful HOG thread.

I was all set to buy some more HOG when I notice it's up over $1.
I'm always trying to figure out what I do in such situations. Do I buy it anyway even though it's gone up? What if I think it might go lower, but I'm afraid it won't? After all, didn't I think it was undervalued to begin with?
In a nutshell this is one of those moments that highlight the emotions that run the market.
How do other deal with this kind of situation?


Here is my starter for two and I look forward to others thoughts:
• Patience
• Constantly remembering there are more opportunities than capital
• I posted on Falling Knives recently and said My new investing rule number one is Chill out by doing so you’ll much less likely to loose money.
• Know what you want to pay for something and if you don’t get it for your price then move on.
• Don’t fall for thinking the light has just been turned on, just because you have just noticed the light.
• Place your limit orders and don’t pay attention to the mood of the market.
• When deciding on your price remember price of individual companies normally goes to extremes.

Yes I know I’ve said the same thing in many different ways; reinforcement is my mental ally.

Let’s take HOG. Sparty and Kelbon have outlined what I think is a great opportunity. However, after the August dip I am now 106% invested and not interested in buying anything more unless it is a fantastic opportunity. I haven’t done this and have only taken a quick look, but here is how I would practice what I preach.
Place a limit order for HOG at $50.16 (random cents above $50) and sell a Jan 08 $50 Put for $2.25. If HOG is under $50 in Jan 08 then I’d have a double position in HOG at what I consider a fantastic price ($48.90). If it dips to $50 then I get a position at $50.16, if it doesn’t then at least I get some income. Buffett used this method when buying into KO, I think there was a Post of The Day on that.

Now if you think HOG is a can’t miss, must buy opportunity I will boldly say that you need to re-read this and everything you can on mastering the psychology of investing. I am not saying the HOG isn’t a great opportunity here or that people shouldn’t be buying this falling knife http://stockcharts.com/charts/gallery.html?hog I am saying pick your price and stick to it as there is no such thing as a must buy.

Best
Dean
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No. of Recommendations: 1
Good points, Dean.

I won't pick on Bozob because #1 he's a good investor and #2 why in the world would I? But I did notice the question and it struck me as odd too. With a little hindsight I offer this simple observation: At the time of Bozob's post, give or take a nickel, the price of HOG was $55.00. Right now the price stands at $54.11. And tomorrow it will close at ... who knows? It could have gone the other way, too ... but ...

And for my friend Sparty. I might bet ya a barley pop that HOG hits $52 before it hits $56. I might. I'll have to think about it awhile because as you know, we sophisticated Doral investors hate to gamble.

Patience indeed. :)

Dan
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No. of Recommendations: 1
I won't pick on Bozob because #1 he's a good investor

Gee...Thanks. But I certainly don't deserve that. I've had a couple of good picks, but I've also made my mistakes including having one point in my investing experience where I listened to Jim Cramer. (Now I listen to him, but only because I feel better when he says he hates something I like.)

I went with my gut which was to do nothing. I think HOG is a good company, but I was pretty sure that the runup was not related to fundamentals. And when it isn't related to fundamentals then I get suspicious.

bozob
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No. of Recommendations: 35
.
... I certainly don't deserve that.

Yeah, bozob, you do deserve that.

You want suspicion? I get suspicious when I want a company bad enough to buy now and I’ll worry about price later. It all goes up eventually, right? Eventually, maybe. It simply does not build wealth. I've found a few exceptions among small- or micro-caps that never seem to be really, really cheap (GRMN is my 2nd largest holding for example) but for these big guys, patience is, IMO, absolutely critical. If ever I like a large-cap company so much I "gotta have it" I've come to anticipate I'm going to be better off with an index fund. If you wait to buy, what are they going to do, double next month? Not likely, and so what if they do? You didn’t lose a penny. So why not look for HOG’s (for example) big brother who's currently much less popular and thus better priced, while you wait for HOG to hit the greasy, money-making bottom? (Or, is this it?)

I think HOG is a great company, and I don't give much advice. Since you flatter us to ask, I would suggest finding several (more is better) companies you really like and really want to own—companies you want to own as much or more than you want Harley--and then patiently wait until one comes to you, right down to that "I can't lose!" price, which only you can determine. For me HOG isn't there but it's getting close. And if I ignore the state of our economy, joke that the idea of "knowing" this is, I'd be a fool. Right now, for Harley, these factors are big fat checkmarks on the "con" side of our Buy/Wait ledger until a lower price allows room to include them. Just my opinon. Otherwise, I’d own more shares of Harley right now.

If you throw away most of the folk-art investing truisms (I can't wait for the next in Denny's series) sometimes it really is this simple. I like HOG, but I'll like it much better if it goes much lower. And if it doesn't, I'll just wait for another company on my wishlist to come to me, meanwhile keeping my cash in BRK. If HOG reaches my buy point and turns down again after I’m in, I'll buy more because I didn't shoot the moon the first time around. I also, btw, didn't jump the gun and put my scarce capital to work far too soon. I want it working hard all year long. I’m a lean, mean fighting … investor. Lastly, with volatility like we haven't seen in the market in years, are we not going to be able to find other opportunities?

And I'm sorry if I sound like a know-it-all, I'm definitely a know-far-too-little. BTW, thanks to mklein9 who gently convinced me just recently of the value of the BRK as cash philosophy, it was staring me right in the face as I already owned BRK. See how this works? :) Learn one thing, pass on another tidbit to someone else and always, always keep learning. It makes the world go 'round. And this board? That's why it works so well. People learn and people share. Simple, but all too hard to find.

So be patient with the price, and be very, very demanding—with HOG and with all your companies. You owe it to yourself. Pretend every dollar counts! :) Meanwhile, are there other companies with moats the size of Harley's that we can look at and analyze? That's why we're here. Let's dig 'em up!

Bottom line? If you gotta have Harley, go for it, and sure as hell I don’t want to be the one to talk you out of it. No way, no how. But first, because you asked and just to see the range of possibilities, please consider two extreme scenarios:

#1: Harley languishes at -2.1 RMS for 9 months, and starts to move upward, never looking back.

#2: Harley is "rediscovered" tomorrow by Wall Street and jumps 5% next week.

Now you expect me to ask, "Which time was a better time to buy?" But hindsight from the future is not available to anyone I know of so the point is moot. So I am asking you, "Which is a better buy time to avoid?" I hope you see the difference. If not, don't worry about it. I'm probably a minority of one here. And that's ok too--it just seems to work for me.

___

AND IF YOU WANT THE VERY BEST ADVICE I HAVE TO GIVE ON BUYING HARLEY NOW, LATER OR NEVER, HERE IT IS:
___

It doesn’t much matter. Far more important, whatever we decide to do about HOG, let’s write down our reasoning where we can't lose it, and revisit our notes every six months. Regardless of our decision, I guarantee we will learn from the process, maybe enough to change our “luck” permanently. Now imagine if we do this for every buy/hold/sell decision we make. With a little effort we might learn something that profoundly affects our personal CAGR now and forever. Wow. Knowledge is power.

There aren't many guarantees in investing, so grab all you can. Oh, and get the guarantees in writing.

No one has all the answers, bozob. But asking the right questions is always the sign of someone who "gets it." You get it, and that's why I know you deserve the title of a good investor. If it were so gosh darned easy like some (liars) would have us believe, we could all get together, sip cocktails, watch CNBC and get rich. And that just won't happen, so let’s ask the questions and get busy.

Dan
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No. of Recommendations: 7
Far more important, whatever we decide to do about HOG, let’s write down our reasoning where we can't lose it, and revisit our notes every six months. Regardless of our decision, I guarantee we will learn from the process, maybe enough to change our “luck” permanently. Now imagine if we do this for every buy/hold/sell decision we make. With a little effort we might learn something that profoundly affects our personal CAGR now and forever. Wow. Knowledge is power.

Dan, you are so right...I hope everyone reads your post and gives it a bunch of rec's, because it's one of the best things I've read here yet. About 20 years ago I was doing what most investors were doing at that time, listening to the advice of brokers, reading in-house research materials, and making lots of mistakes. Then something happened that fundamentally changed the way I saw the market and my place in it...I went to an investment seminar and as an aside the presenter mentioned that one good idea might be to keep a journal, recording all our decisions and our thinking behind the decisions. It took a while to sink in, but this one thing has helped me overcome many of the emotions that seem to just get in the way of good decisions....sort of helped me find the things I was doing to lose money and stop doing them. And most of those things had nothing much to do with the market, but with me and how I was approaching it. Success in the market, at least for me, has a little something to do with "what" I do, but much more to do with "how" and "why" I do it. And understanding the how's and why's comes from keeping and studying my journal, which I still keep every day.

Dan, your advice is solid and I hope it will be heeded by others. Great post!

DocJack
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No. of Recommendations: 3
And for my friend Sparty. I might bet ya a barley pop that HOG hits $52 before it hits $56. I might. I'll have to think about it awhile because as you know, we sophisticated Doral investors hate to gamble. - RaptorD


You should know that tempting any Spartan with the bet of a barley pop is nearly always met with "Why not a 6-pack?" =)

Interesting to see this come up as there is another juicy thread discussing BUD. I made a chunk in BUD which I cashed out earlier this year at $52.50 - not because I was brilliant or anything, but I needed cash to buy more JNJ at ~$60. I had a gain of 27% in about 14 months on BUD, so I locked it in. I used rule #2 for that sale - I simply thought I had a better opportunity for my money at the time.

BUD is still an interesting play, and one that I wouldn't be adverse to buying again. I still have a few shares (those purchased via dividend reinvestment in those 14 months), so I'm still keeping track of them.

In any case, I get to fly out to Arizona later this morning to begin two weeks of testing cars in the Desert. I'm just hoping I don't get hit by the remnants of hurricane Henriette, but it looks to be passing to the east of Phoenix. Hopefully I'll have time to keep checking the boards here in the evening, but something tells me it won't be often. =) Until next time...

Best Regards,

Sparty
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No. of Recommendations: 6
…let’s write down our reasoning where we can't lose it, and revisit our notes every six months. Regardless of our decision, I guarantee we will learn from the process, maybe enough to change our “luck” permanently.

Writing it down has proven to be really important to me, and a tool in helping me me move forward in a more disciplined way — procrastination has been my best friend. Often a stock would seem attractive and I would briefly dig a bit and decide to revisit it if it got cheaper. When it did get cheaper — maybe a lot cheaper — because I hadn't recorded my thoughts, of course I couldn't remember them with any clarity and by the time I got around to starting again the price would have inevitably recovered and I would say to myself "OK, next time."

So, sometime after I discovered this board, because it attracts a group of active and intelligent posters and I didn't feel like I was writing to thin air, If a stock looked attractive and still did after I looked deeper and briefly wrote what I had found, I would post here. By doing this I was ahead of my old game in several ways:
I had distilled my thoughts and written them down and now had a written record.
There would usually be some feed back, either positive or negative; either way makes me think more about my reasoning and conclusions. But best of all I could get a glimpse of how others think and research — how they do due diligence. Being open to other ways of seeing things, or methods, or different spins on due diligence is the only way I'm ever going to become a better investor.

Also, I've found it useful and interesting to look at other's postings about individual stocks and respond — sometimes I see fairly quickly that I don't agree and why, other times it's more complicated. But best of all; all of this is fun.

Usually, I've found the discussions about individual stocks of more interest than discussions of generalities. I wish more people were comfortable with posting their thoughts about specific stocks and investing opportunities. Personally, I don't mind if what I've posted proves to be wrong headed down the road — I can only look back and try and see how and where I made my mistake; hopefully learning from it in the future. I'm not trying to prove to anybody, or myself, that I'm a good or insightful investor, I'm only trying to be a better one.
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No. of Recommendations: 4
Great post Dan
Your comments about keeping an investment journal makes me think we could expand this thread or start a new one on investing tips.
How about we all compile 101 Investing Tips? As you say I'm sure there would be lots for each of us to learn.

Dean
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No. of Recommendations: 1
I might bet ya a barley pop that HOG hits $52 before it hits $56. -RaptorD

Someone get this man a barley pop.
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