No. of Recommendations: 1
Ok, so I am going to show my stupidity here, but I thought it was good to buy in low and sell once it got high? Obviously I have no investing knowledge, I just read about something and if it sounds good I buy some shares and hope for the best. In your opinion, are you better of purchasing say Best Buy or some known company than taking the chance?

Good question. The oft-repeated "buy low, sell high" advice requires some clarification. The share price itself doesn't really mean anything. Consider how CLYW and BRK-B have performed recently: <,BRK-B&d=s >.

Say you had $10,000 to invest on September 1st. CLYW was trading around 80 cents a share, while Berkshire's Class B shares were about $2,800. Was Berkshire "expensive" just because it was priced so much higher? Was Calypso necessarily "cheap?" The investor who bought Berkshire would now be up about 6% while the investor of Calypso would have lost nearly half their original ten-grand.

When I look to "buy low," I'm looking for stocks that have been oversold by the market due to bad news, or news that wasn't as good as the market expected (Best Buy is a possible candidate for this). Or maybe I see better growth prospects ahead than what most analysts predict (I think many electronics consumers were in a position to see the iPod's success before Wall Street caught on). There's more to it than just looking for penny stocks. After all, it's rare to find a penny stock that isn't cheap for good reason, but you can often find higher-priced stocks that turn out to be good buys in the long run.

This approach requires understanding the companies and knowing why you expect them to be successful. Doing this means you're not just taking a chance and hoping for the best, but that you have legitimate reasons to expect a company to grow and you'll be able to track their success (or see their failures and sell before a flurry of analysts cut their ratings, which almost never happens before a large drop in the price). :)

Still, don't interpret what I'm saying as advice to sell or avoid Calypso. Like I said before, I haven't fully researched the company and it may very well be worthy of a small investment. I personally wouldn't bank more than 5% of my portfolio on it just because there are some significant risks that go along with most penny stocks, but some companies are able to rise out of penny stock status with the right product or service and management team.
Print the post  


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.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! 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.