Continuation from Friday...(A Few More Rules For Finding Tenbaggers)
RULE #10: Sit Out or Get Ready To Go Short When the Time Is Right
Finally, at certain times you will find yourself in extreme overvaluation bubbles. Similar to those at 2000 and 2007 tops. It highly probable that you will not be able to find any potential Tenbaggers at general undervaluation levels in such environments. When that happens, it would be an opportune time to get ready for a bear raid on individual stocks or the overall market. If nothing else, it would be prudent to stay out of the way.
Today’s market environment, in August of 2014, presents us with a perfect illustration of that. Due to its overall extreme valuation levels, I am unable to find a single stock issue that would satisfy all of the requirements above. That’s right, not a single stock that I would invest in as a potential Tenbagger as most stocks have been driven to unsustainable valuation levels. This tells me a few things. First, the market is overvalued and in a bubble. Second, if I have any remaining long positions I should consider liquidating them now or as soon as the market breaks down (technical bear confirmation). Finally, I should consider going short if my investment strategy allows it.
Clue #10: If you are unable to find any potential Tenbaggers at undervalued levels, the overall stock market is likely to be in a bubble. Be prepared to exit your long positions and to go short at a moment’s notice.
Conclusion: If you are to follow the steps above it is highly probable that you will not be able to find more than 10 individual stock issues, at any one time, that satisfy all of your requirements. When you do find them, make it your business to learn everything you possibly can about the underlying business and its stock price. From the fundamental, technical and mathematical perspectives. It will make all the difference between investing in a stock that does well and a stock that goes up 10X or more within a relatively short period of time. When all of your requirements are satisfied and you are confident that the underlying stock will outperform the market by a large margin……..buy as much stock as your diversification strategy allows.
And that’s all there is to it.
This book will now be edited. It should be available over the next 30 days or so.
