Thursday, November 13, 2008

Contrarian Investor


Want to know how to make money in the stock market? Whatever I advise, do the opposite. It works every time. It is almost uncanny. I attribute it to beginner's luck. I am naive enough to make predictions about the market. The pro's out there can see me a mile away and the market seems to always go against common sense. The fact of the matter is, the volatility in the market is ruled by traders and that's just what they want...kind of like when a noob sits down a "real" poker table. I don't mind because I play the market from the sidelines, but all I know is that the market is the great humbler.

I follow drug stocks...an addiction from a former job, but every day I track the big pharma stocks and make assumptions and suppositions about the sector. I'm terrible about predicting movement of the stocks, but I think there is some value in measuring the relative performance of a group of stocks. Somewhere a long time ago I read to go with the strongest stock and drop the weakest. The reasoning behind this is that it's too hard to detect a turn around in a company and you'll lose money until you are right. If you go with the best performing stock, you'll probably fare better. However, when good turns to bad, you have to be very careful. I was watching Bayer all last year and it was performing very well compared with it's peers. However lately it's sucked, big time. I wasn't able to realize the falling trend because of all of the noise with the rest of the group. Merck also was doing good a couple of years ago, but anyone who held onto the stock is praying for a turnaround now. Is it a good time to jump it? We'll, as I said, do the opposite of whatever I say and you'll probably do well.

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