How do you determine your entry point into a stock?

Question

What informationdo you use to help you determine when to get into a stock? What is cheap? ect.

Answer 1

Good questions. Though the other answerers are mostly correct, it is a beginner's mistake to assume that buying is the hard part, and that selling is easy or a non-issue.

I say that buying and selling are both equally important.

The value investor approach is to try to determine the fair value of a stock, and then buy only when the price is substantially below that price. Ben Graham used to insist on a 50% discount in the 40's, 50's and 60's, but in modern times you are lucky to get a 30 or 40% discount.

Determining fair value: Look at P/E, Price/Book, earnings growth rate, dividend yield, div. growth rate, finally

LPEG = (P/E)/(Earnings growth rate + Div. Yield).

I tend to focus most on P/E, Div. Yield, Div. Growth & LPEG. It is difficult but start with a list of good stocks & pare them down by looking at these numbers.

Watch the stock for a while & buy on dips or when the whole market really tanks (10% correction).

Finally, don't buy all at once or sell all at once, because you will never pick a perfect bottom or top.

Answer 2

1} my buddy was in hospital due to smowmobiling and there in the same room was a half-dead miner recommending some company that his father in law owned, the company owning a huge pine of tailings which would be leached for gold. We bought, held six months, and won.

2) The pumps came up th El Bonanza to drain that old 1930 glory hole. Obvious, something was going on. It went up like a rocket and down like a stone when the pumps went away. Bought and lost.

Moral: the real question is not so much when to buy, it's when to sell.

Answer 3

I use technical analysis to find the best entry. That's only 10% of what you need. 90% of a trade is your exit stradegy.

Answer 4

Buy breakouts.

Use charts to determine pivot points.