I like Ford more than GM right now

Other than those who are members of my Cathleen’s Corner site at EnterActive Media, who occasionally stroll into this forum, I block the majority of posts people write in this forum.

Though the core reason for doing so is to prevent traders from trying to hype or diss a stock to an audience they know is mostly comprised of novice investors — I sometimes find myself having to invoke the “count to three” advice when I read some of the messages that are blocked.

I really have to refrain from writing back curt messages, such as “Can you read?” or “Are you brain-dead?” or “Please, baby, you don’t have the balls to be an investor — stick with buying CDs at your local bank.”

But I refrain — for the most part — when people leave messages, such as “When I saw you added Company X to your due diligence list, I did my research and bought some, too. It went way up over the next few weeks, but then it went down. What should I do? Is it going to go back up again?”

The answer to that is — please refer to the name of this forum — “This ain’t your daddy’s market anymore, baby!”

That means, if you truly did your homework — then you should know the answer yourself.

I also hope you really read my columns and have read where I explain that I don’t buy the majority of names I place on my due diligence list — that’s the point of due diligence — to decipher what is and isn’t worth buying.

And, more importantly, I have to wonder whether anything I preach in very simple terms in this forum is seeping in — because I’ve explained over and over again that this is currently a trader’s market — which means the name of the game is to take profits whenever the opportunity presents — and cost leverage your way into a position.

Let me explain one more time this concept.

Say you like Company X and it’s currently trading at $10 a share, so you buy 100 shares for $1,000.

Two weeks later, your due diligence pays off, the company has been on a steady ride up, and it is currently selling for $15 a share.

Don’t be greedy.

Don’t cross your fingers and pray it’s headed to $20 — either cash out a certain percentage of your stock — or cash it all out.

So, let’s say you sell 50 shares of those initial 100 — you now have $750 of your initial $1,000 investment back in your pocket — and you still own 50 shares of the company — but your out-of-pocket expense is now only $250 for those shares.

Regardless of whether the stock goes up or down — you’re now sitting in the driver’s seat.

If the stock goes up — fantastic! — you’re making even more money off that $250 investment — and keep taking profits accordingly.

But let’s say the stock dips down to $7.50 — but you’re still doing your due diligence on the company and like what you see, and believe it’s just getting rocked in the volatile market — then reach into your pocket and put your money where your homework is and buy another $500 or so worth.

You’re now playing with only $750 of your money in the market, instead of the original $1,000 — and when the stock soars again — as your due diligence tells you it will — then keep taking those profits and playing the “buy low, sell high” game.

Most newbie investors make two major mistakes — instead of seeing a buying opportunity for a company that they like when it’s trading low — they get frozen with fear by the thought of “but what if it goes lower?” — and when they have money invested in the company, and the stock soars, they get frozen by fear by the thought of “but what if I take my profits, and it goes higher?”

At some point, you need to grow up. When you really do your homework — you’ll no longer be paralyzed for fear and start realizing how to trade in this market.

And to answer a few questions from readers who want to know if I think GM is a buying opportunity now — while I will never say “don’t buy this or that” — my gut tells me with all this bankruptcy talk, the company could be delisted from the exchange any day now. I also think day traders and options traders will continue to trade the company, but feel it may be a bit more complicated for newbie investors at this point — but, again, if your research tells you it’s a buy — I won’t stand in your way.

Personally, I’ve instead added Ford to my due diligence list.

Just remember the usual disclaimer: Don’t base any of your investment decisions on anything you read here. Do your own due diligence, or at least enough research to pick the right professional to handle the investing for you.

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2 Responses

  1. [...] whether they should jump into GM with the government getting involved — I’ve been consistently telling you that Ford is my pick in this sector. If you listened to me on — depending on when you started [...]

  2. [...] you read my column last May when I went against the grain where many on Wall Street were hinting that GM was going to be a [...]

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