The market has had a tough summer, the past two days notwithstanding. I had expected a stronger market in early summer followed by weakness in August and September. Despite the poor showing so far, I still think we’re in for more trouble ahead.
My open positions have suffered in the decline. I’ve been building a technology portfolio gradually over the last nine months in anticipation of what I see as an impending tech recovery sparked by:
In addition, I own some tech stocks because of individual catalysts that should get their shares moving upward at about the same time the above conditions take effect on the market. When is that? Toward the end of this year.
I research my stocks very carefully and initiate my positions at low prices. It’s inevitable in this business that sometimes what’s bought cheap gets even cheaper. As I spelled out in my Neatest Little Guide to Stock Market Investing, such carefully researched stocks provide an opportunity when they decline. These are not short-term trading positions, they’re medium- to long-term holdings. They’re also rock-solid companies showing all the signs of a bright future with insider buying, stock buybacks, and brisk R&D; spending.
Therefore, I’m using the slow days of summer to buy more shares. I average down a lot. It’s one of my favorite techniques. When a perfectly good company’s share price sinks over concerns that I consider to be temporary or misplaced, it’s an opportunity. Buying more shares lowers my average cost per share so that I make a higher profit when the stock eventually recovers.
Now, mind you, this is not the way to go for short-term, speculative stocks. If you own an earningless, high-debt, poorly managed company that you bought at $1.75 after reading that it was about to discover a cure for cancer, you better have a tight stop-loss on that thing because a decline to, say, $1.50 is not a chance to buy more, it’s a chance to preserve what’s left of your capital.
I don’t invest that way. You shouldn’t, either.
The way to win in this business is to spend a great deal of time choosing companies that are trading for less than they’re worth, buying them with a catalyst in mind that will get the shares going up again, and continuing to buy more shares of those companies as long as the market keeps them on sale but the catalyst is intact.
Guess what? We’re in just such a time now. So, The Kelly Letter is buying on weakness. My subscribers and I have limit orders in place to cherry-pick more shares of these depressed technology companies when they fall further.
However, my strategy is broader than just that. I have warned from the beginning of this year that we would see significant market weakness in August and September. The time frame might not be exact, but roughly during those months I expect lower prices.
To protect my tech-focused portfolio from extreme losses, I’m watching for the right moment to open a hedge position. A hedge goes up when the market goes down. Because I’m hedging against a loss in my technology holdings, it makes sense to go short the Nasdaq 100, a tech-heavy index. That means that if the Nasdaq 100 declines substantially, my hedge position will make money. This will offset the losses in my tech holdings.
The perfect outcome for me would be to:
My subscribers have been well aware of this game plan since the beginning of the year. Last weekend, I sent an in-depth look at the current market that included my call for a Nasdaq rally before the next leg down. That rally started on schedule Monday with a 2.1% gain and continued into Tuesday with a 0.6% gain. I’m looking to open the hedge at a high point, of course, before the Nasdaq begins sinking again. I’m thrilled to see the high point coming into view.
I am not at all worried about the state of the market. This is a grand time for those with the fortitude to see opportunity instead of danger. It’s precisely these kinds of fluctuations that enable us to make money in stocks. Don’t miss the chance.
If you’d like to join me and my legion of loyal subscribers, now would be a splendid time. You still have time to open the hedge position, and you’ll be able to duplicate my portfolio at very cheap prices. Trust me, when technology gets moving again, it’ll blow your hair back. You don’t want to miss this chance.
Plus, I’ll give you a whole month to look over everything I’ve written since the beginning of this year. It’s all archived on my subscriber site. It’s not just a data dump, either. It’s organized by date for those interested in reading everything chronologically. In addition to that, each portfolio position is shown with:
That last point is particularly helpful. Say you just want to know about our semiconductor equipment maker. No problem. Go to its page, read all about it, then click to each update I’ve provided since investing. It’s a snap. Subscribers love this helpful feature.
So, I’ll give you a whole month to peruse the site to your heart’s content. During that month, you’ll also receive every note I send, including the famous “Week In Review” bulletin that comes every weekend. You’ll also get two reports:
The cost for the month? A penny. That’s right. Just $0.01.
If you stay with me — and if history is any guide, you will — the cost is just $5.48 per month. If you ever want to stop your subscription — and if history is any guide, you won’t — just cancel and the monthly payments stop immediately.
What do you say? Come see what professional guidance can do for you. When handled properly, the stock market is a wonderful, long-term moneymaker. Isn’t it time you put it to work for you?.
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