Oct 3rd, Amazon stock price dropped to $1695 which triggered my stock alarm of minimum $1700. I saw it while I was taking a walk, but i didn’t know that was the last call. I thought it was gonna fall more. So now the
Q: how should I know if it’s a great opportunity to buy, or a point it’s gonna keep falling?
A: 3 aspects.
- Most importantly, what is the value? (fundamental analysis) don’t bet on the stocks that you don’t know or you know it’s over-valued because the random-walk stock price will depress you and does not improve your investing skills at all. (In the long term, the market is a weighing machine.)
- Market cycle stage (macro analysis) (how long does it take for stock price to bounce back)
- Who are buying/selling the stock (institutional holdings) (Understand the current prospect of the company from major holders position change. Moat decreased? Over valued? …)
Fair value is just a brief range, I usually take fair value valuations provided by morning star and Gurufocus to help get the overall idea of the fair price range. The best case scenario is to find the stock that Gurus are buying, even the price has increased, it’s still worth investing. The first stock I bought was STOR in 2017 because I got a news from a TW local digital newspaper that Warren Buffett has bought about 9.8% of total shares outstanding. Moreover, besides BRK, Vanguard and BLK were also the top three holders of the company. I called the stocks held by these three institutions Golden Zone Portfolio. (Stay Golden Pony Stock)
Although it’s difficult to determine which market stage we are in right now, there are some indicators we can take with a grain of salt including
My Reading List:
How to determine fair value?
How to know the current market stage?