Advice on When to Buy Stock
Have you ever seen Coke or Microsoft selling at a single-digit P/E ratio? Me neither. And these aren’t isolated cases. The fact is, by hoping to buy super-cheap, you would have missed out on many of the greatest investment opportunities of our time. To make the big bucks in the best investments you’ll have to forget “buy low, sell high.” The new Oxford Club investment rule is “buy momentum, sell higher.” We like to buy companies on the way up. It usually means the company is doing something right. It’s equivalent to your golf- shirt business in The Bahamas. Let me explain.
Let’s say that you and I believe in the idea of a three- wheeled car, and the price of the stock in the company that manufacturers them is at $30… but falling. When do we invest? At $30? $20? $10? $5? We don’t know how far this thing will fall. We want to buy when there’s some inkling of a market confirmation of our idea.
There is no price that’s the right price. Take $10 for example. I’d be a buyer at $10 if our three-wheeled car had fallen to $5 first, and then the stock started to take off because Ford was going to take it over. But I’m not a buyer at $10 if it’s one stop on the way down-the last stop on that elevator could be the basement. The bottom line is this: I don’t want to buy dreams alone-I want to buy dreams that are turning the corner to reality.
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