Investing Strategy

The 2CentView strategy is simple: Buy Low, Sell High, let the house money (profits) ride and build a portfolio of great companies for the long term.

Unlike many brokers who give you lots of information about the pros and cons of the stock, 2CentView will give  you a price to buy, a take profit target and stop loss, and a reason why it may go up. If you like the company, do some research, and if agree with the reasons it may go up – or even have your own reasons – then do the trade. Sometimes, it may be worth waiting for the stock to go higher before you buy – don’t forget you are not looking for 5 or 10% gains, you are looking for 15-1000% gains!. So, if a stock has done nothing for 2 years, and you may think it go up – wait till it goes up 5% or so, or breaks a significant chart point (char break out!). 2Centview therefore often sets a Buy target price as well as a sell target price.

So,

  • Follow 2CentView on twitter where the ideas are generated. The model identifies companies which are trading cheap to their Fair Value and upside potential of 20% or more. A take profit price target is set at or below the FV.
  • If you like the idea put the trade on once you understand (and like) what the company does and how it generates revenue and what would be the catalyst to move the stock higher e.g. New CEO at $YHOO, Airline Industry consolidating and increasing pricing power ($DAL), Develop Mobile Strategy ($FB) etc.
  • A stop is normally posted. If not ensure your Risk Reward ratio is at least 2:1 i.e your potential profit is at least twice your loss.
  • Decide on your position size – riskier stocks should have smaller positions but higher risk rewards. Do not have more than 15% of your portfolio in one stock.
  • You may only buy half your intended purchase and the other half when the stock goes up another 5% to 10%, instead of buying it all the beginning.
  • Stick to your take profit targets – within reason – if you have achieved 75% or more of your price target in a week, when you expected 6 months – it may be prudent to take profit earlier and divert the cash into another opportunity which crops up.
  • If the take profit target is reached – look at the reasons why the stock has reached the target  – it may have more upside – but do not get too greedy.  I made the mistake of selling $FB at 34 just after it announced an amazing  quarter  – i should have held on a bit more and sold at 39. However, the main thing is I hold a core position in $FB which cost me nothing and then some.
  • Decide whether you want to keep a core position or sell all. Normally, you should be keeping a core position as the initial investment should normally be company you like long term.
  • STICK TO YOUR STOPS. If it goes wrong then SELL it ALL. The Fair Value is based on predictions about future earnings which could be out of line with what the market thinks and what the market thinks is more important than what analysts think.
  • Monitor your core positions – if the company goes into decline – such as Blackberry – then sell ALL your core.
  • And last but NOT LEAST, ensure your portfolio is DIVERSIFIED. Diversification is Wall Streets only free Lunch.
              • Sector Diversification: Have at least 5 sectors from: Tech, Oil, Retailers, Media, Financials, Housing, BioTech, Pharmaceutical, Commodity, Industrials.
              • GEOGRAPHICAL diversification which should include the United States. The United States is THE home of innovation and companies can go from zero to billions of dollars in the space of a few years. Apple, Google, Regeneron, PriceLine, NetFlix, Tesla, Amazon  to name a few great companies from this great country which leads the world in nearly all industries.
              • Have a mix of growth and recovery stocks with big upside (25 to 1000%) and stable dividend paying stocks which have more moderate upside (15 to 30%).

 

Copyright 2CentView.com November 2013

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