Bob_Sacamano said:
It's called "Value Investing". Why in God's name would you buy a stock AFTER it's already appreciated? Oh that right, if it's already gone up, there's no way it can go down. Try buying stocks in good companies after they're on sale.
BTW, your Enron example holds no water. Remember value investing stipulates you only buy stock in GOOD companies. I'd highly recommend you read The Intelligent Investor by Benjamin Graham. Another must-read is Security Analysis by Graham and David Dodd.
Bob
On Friday I had the occasion to buy some stocks that had already appreciated. As I am not a good enough trader to know when these things have "alredy appreciated...depreciated", I have to rely on my own technical signals to tell me if there are more buyers or more sellers. I buy on strength and I sell on weakness. By the end of the day I had a total of 45,000 reasons not to follow your advice.
It was a very slow trading day for me, as I only executed these two trades. My money management rules restrict the amount of capital I can risk once daily/weekly/monthly profit targets/loss limits are met. This month, the oil sector (talk about selling on weakness!!!) has pretty much been letting traders print money so I am well over any profit target and as such severely limit my exposures on subsequent trading days in that month (arbitrary but what the hell, I'm the boss).
But here is the run down of those two trades:
BOT: I went long 2500 shares at $98.90 (0957 - single fill) AFTER the stock had "appreciated" from its open price of $96. I closed the position between 1403-1406(mutiple fills) @ an average of $112.15. Pretax, post commisson gain of approximately $33,000 on about $250K.
CME: I went long 1000 shares at $337.01 (1018-1021 - multiple fills) AFTER the stock had "appreciated" from its low price of $333.10. I closed the position between 1327-1330(mutiple fills) @ an average of $345.26. Pretax, post commisson gain of approximately $12,000 on about $340K.
In both cases I missed the top of their daily appreciation, so there are opportunity losses in these trades. As an aside, I would have expected at least five trades to hit these levels but for whatever reasons the MM and Specialist were kind that day and my stops weren't hit. I normally have a laundry list of losses to offset about 30% of those gains.
Anyway, there are those of us out there who march to the beat of a different drummer as it were. Many people in my circles are rabid short term traders (literally a thousand trades a day) and some are short selling fanatics (wouldn't enter a long position even if it would make them money). As for me, I go with what works for me. I don't have an attention span sufficient to hold a position overnight, much less a year so I pay the penalty in taxes. I don't care if a position moves up or down, I just want it to move.
And I believe you have no idea of the "value" in your investment until the position is closed.