It’s always easier to be a bandwagon investor. Buying high and trying to sell higher makes for a decent investment strategy if you like “playing the markets.” I think back to my days as a stockbroker, and some clients just loved to trade stocks, even if they weren’t making any money at it. I don’t care what anybody says; the stock market is like a grand casino and some people just can’t stop playing.
But, what if you aren’t a trader and you don’t need to check your stock prices every hour? What if your approach to the equity market is not about trading, but trying to make a small fortune? This kind of approach takes a lot more time and self-discipline. It’s a buy-low, try-to-sell-high investment plan that requires a lot more work and a dose of good luck. It also takes an ability to identify and stick with a business that the rest of the marketplace doesn’t think has any potential.
As I’ve been writing lately, a great way to come up with attractive stocks in this market is to peruse the equity landscape for those stocks making new 52-week lows. I especially like finding stocks that were once high flyers, with track records of both operational and stock market success for shareholders. Every business experiences tough times that usually don’t directly correlate to the general economy. Even the best companies get knocked down for while and have to reinvent their business plans. Apple Inc. (NASDAQ/AAPL) is perhaps the best example and it’s a case study that’s worth researching.
Clearly, if you want to find the next Apple in the stock market, the price action has to be there. This means that you have to go against the crowd and consider a position that’s down. Pull up a five-year stock chart on AAPL and you’ll see the volatility. And it isn’t just related to the financial crisis.
You also need a game-changing catalyst, such as a new technology trend or a legislative event that opens the doors to an entire new industry. “iPhones” and solar panels come to mind. Whatever the catalyst, it must be a core competency that makes it difficult for others to copy quickly.
Fortune-making opportunities in the stock market rarely come around. How many people in your neighborhood do you know who are retired from equity investing? But, it does happen and they are out there. Trading the markets is fine if you like that kind of daily action. The big money, however, is always made in the Apples of the world.