Mike Tyson and Value Investing

The equity markets decline this week reminds me of Mike Tyson’s statement that everybody has a plan until they get punched in the face. Value investors view market declines as a gift because they get to buy more shares at a cheaper price. I do not subscribe to this Theory

Value investors try to muscle the market if it doesn’t agree with them. They think they know more than the market. For many value investors, a conviction investment often turns into a prayer investment. That’s an investment where they just hope they can get back to even when they realize that the fundamentals of the company have worsened.

I do as much research as any other value investor but I have much more respect for the markets. When a company is fundamentally underperforming and the stock price chart breaks long-term support in most cases that indicates trouble ahead

My stop and reenter method is anathema to many value investors but I believe it’s an elegant approach for value investors. It gives you the ability to stop out and reassess the situation. You can always get back in. It amazes me that many value investors refuse to stop out and reenter. Yes, if you’re managing billions of dollars this is difficult but for any millionaire, it’s not difficult to reenter. Anxiety seems to disappear when you stop out as you can now think clearly and reassess the fundamentals. In most cases, you will want to wait for the stock price to rise back to level where you were stopped out which will confirm your original fundamental hypothesis.

If you’re interested in buying turnaround stocks and using the stop and reenter method to protect and grow your capital consider becoming a member of Turnaround Stock Investing.