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Smart, Dumb, then a Genius... All in 5 Hours.

January 26, 2014 | About:

Who trades right at peaks and exact lows? Only liars.

Lat week's Emerging Market insanity allowed me to buy blue-chip PVD for Peanuts.

Successful investing is difficult. Catching long-term pinnacles when selling, or buying at even daily lows, let alone yearly ones, is statistically impossible. The 315 point drop in the DJIA on January 24th was enough to test everybody’s nerves and trading instincts.

Hardest hit were shares of businesses located in emerging markets (EMs) and the ETFs that specialize in them. The huge redemption pressure from quick-on-the-trigger traders forced portfolio managers to sell EM holdings last week, regardless of whether they still liked the stocks’ prospects.

Thinly traded issues reacted violently as bids disappeared and spreads instantly widened. At 10:58 in the morning I entered a below-the-market limit order to buy PVD at $82.30. It was a price south of PVD's previous 52-week bottom. Someone hit my bid at 11:01 AM. I felt very smart.

Just a few minutes later, at 11:10 AM the shares were further depressed. I bought more @ $81.20. Shortly after midday the selling stopped.  I sprang for more at $81.32 thinking I’d already seen the low.

Oops.

Right around 2 PM a few sellers dumped PVD at market sending the stock down to $78.19.

Shares that opened the day, and looked cheap, at $84.42 were off by another 7.4% intra-day. Now I was the fool that tried to 'catch a falling knife'.  

Being stubborn (perhaps reckless?) I paid the $79.50 asking price at 1:45 PM. Boom, my 100 share order executed and the ‘ask’ jumped by 60-cents. By 4 o’clock PVD was trading at $83.  At closing time I felt really good about my day’s accumulation.

What you now see as PVD's low print for the year was set on just a one hundred share lot. If you blinked, went for coffee or wanted it in quantity you missed the chance to buy there.

The intra-day action seemed very scary. It was less so if you looked at a full year’s action.

After extensive due diligence, US-based insurance giant MetLife (MET) saw fit to buy up the whole company in a tender offer at $92.21 per US ADS (American Depository Share) last summer. They now own a large majority stake and may well go back for the rest later.

Frantic markets make for big price swings that often have nothing to do with fundamentals. Use that to your advantage by buying dips and selling blips.

No one can accurately predict short-term moves. For true investors, a low current offer price is always absolutely better than a higher one when you are putting your own money to work.

Disclosure: Long PVD shares

About the author:

Dr. Paul Price
http://www.RealMoneyPro.com
http://www.gurufocus.com/peter_lynch.php
http://www.TalkMarkets.com
http://www.MutualFunds.com

Visit Dr. Paul Price's Website


Rating: 3.8/5 (10 votes)

Voters:

Comments

rgarga
Rgarga - 10 months ago

Why has roe of business gone up in last few years?

rgarga
Rgarga - 10 months ago

Why has roe of business gone up in last few years?

Could you also explain your rationale to buy this?

deeplydiscounted
Deeplydiscounted premium member - 10 months ago
Can anyone please help me with how one can buy non US listed companies, like companies only listed on foreign exchanges with no ADRs?
deeplydiscounted
Deeplydiscounted premium member - 10 months ago
Can anyone please help me with how one can buy non US listed companies, like companies only listed on foreign exchanges with no ADRs?

Please leave your comment:


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