Dow Jones Industrial Average 25,871.46 (Up) week ending 06/19/2020 - S & P 500 3,097.74 (up)
...And so we enter the age of Robinhood. Swarms of new retail customers, both young and old, armed with their shiny new cell phones, loaded up with their new Robinhood stock trading application.
It has all gone swimmingly so far to begin with, with a high volatility upside time period and a move of 40%. You could buy pretty much any retail stock, regional bank, airline, cruise line, oil stock, casino stocks, industrial stocks, Boeing or some Fintech stocks and made an easy, easy gain. It made it look so easy.
Some people even used leverage on the application borrowing money and invested it for extra leverage. (The 4th deadly sin of investing, unless you are George Soros or Stanley Druckenmiller and you know what your are doing.)
But those fun and easy times are over now. Like in the movie Robinhood with Errol Flynn, King John is trying to lure you to come into the castle for the big target shooting competition and bring your bank account, and it turns out once again that it is a trap!
Head for Sherwood Forest! You could lose your head, or even worse yet your new found money and more.
So if you decide to come to this competition against the Pro traders and their computer algorithms, you better be armed with the proper bow and arrows.
I would recommend to find a simple stock screen program and search for stocks that have a Current Ratio of at least 3 to 1. I would also screen those same companies and pick/screen through ones that have a Return on Equity of at least 15% or higher.
This should keep you out of the "big trouble", working from this screened list. Like Peter Lynch said, " No company ever went broke that didn't have any debt".
.... And, if you are going to fall in love with a stock, like Robinhood with Maid Marion, decide ahead of time at what gain % you want to sell and take a profit. Also if you have made a mistake, that is OK, just acknowledge it as soon as possible, sell the stock, and move on. The best of investors has made mistakes and learned from it. Call it the cost of your stock trading education.
So young Will Scarlet, don't try to steal any mutton from a sword wielding Friar Tuck! If you purchase any stock options, know that you could lose all your money. (All , every cent).
Just stay within or develop a trading discipline. Mine is Value Investing, but there are many successful traders using all different trading techniques and disciplines, including being long and short the stock market at the same time. Find what works best for you.
Best of luck! Keep your eyes open and learn what your personal risk tolerance is for trading stocks.
Best Regards,
Freewilly 06/21/2020
It has all gone swimmingly so far to begin with, with a high volatility upside time period and a move of 40%. You could buy pretty much any retail stock, regional bank, airline, cruise line, oil stock, casino stocks, industrial stocks, Boeing or some Fintech stocks and made an easy, easy gain. It made it look so easy.
Some people even used leverage on the application borrowing money and invested it for extra leverage. (The 4th deadly sin of investing, unless you are George Soros or Stanley Druckenmiller and you know what your are doing.)
But those fun and easy times are over now. Like in the movie Robinhood with Errol Flynn, King John is trying to lure you to come into the castle for the big target shooting competition and bring your bank account, and it turns out once again that it is a trap!
Head for Sherwood Forest! You could lose your head, or even worse yet your new found money and more.
So if you decide to come to this competition against the Pro traders and their computer algorithms, you better be armed with the proper bow and arrows.
I would recommend to find a simple stock screen program and search for stocks that have a Current Ratio of at least 3 to 1. I would also screen those same companies and pick/screen through ones that have a Return on Equity of at least 15% or higher.
This should keep you out of the "big trouble", working from this screened list. Like Peter Lynch said, " No company ever went broke that didn't have any debt".
So young Will Scarlet, don't try to steal any mutton from a sword wielding Friar Tuck! If you purchase any stock options, know that you could lose all your money. (All , every cent).
Just stay within or develop a trading discipline. Mine is Value Investing, but there are many successful traders using all different trading techniques and disciplines, including being long and short the stock market at the same time. Find what works best for you.
Best of luck! Keep your eyes open and learn what your personal risk tolerance is for trading stocks.
Best Regards,
Freewilly 06/21/2020
Great read as always.
ReplyDeleteThanks Phil. I was just looking at Facebook and Microsoft's numbers this morning. They are both juggernauts with tremendous return on invested capital.
ReplyDeleteI actually entered FB prior to the crash. 190-220 range. Didn't buy in March at the lows, but had some conviction that they'd be the key advertising point for small business going forward.
ReplyDeleteEven with the bad news of big players suspending advertising, it didn't hurt. I'm happy to be long FB. I love Marketplace (and how they digested Craigslist) and I love how Zuckerberg threaded the needle on the call recently to the shareholders essentially saying if you hit FB, you hit small business first due to their reliance.