Continuation from yesterday……(What You Ought To Know About Buy Low, Sell High, Go Short & Cover)
Long/Short investment strategy is not that dissimilar from taking a directional long bet or what most people tend to do in the stock market. The only difference is the ability to participate on both sides of the market while playing with various market metrics in order to control risk. In other words, the ROI available to long/short equity is typically on par with long only strategies and comes down to one’s stock picking ability. Whether it is on the long or short side is inconsequential.
In comparison, “Buy Low, Sell High, Go Short & Cover” is a completely different animal. Instead of concentrating on holding positions through their ups and downs for as long as various fundamental or technical metrics satisfy one’s requirements, our newly proposed investment strategy concentrates on squeezing every last dollar out of every possible stock while minimizing risk. It forces investors to pay attention and to act accordingly at all times.
For instance, investors who follow this strategy will no longer be able to sit around and wonder why their stock XYZ has declined 10%, 20%, 30%, 80%, etc….. To wonder when, if ever, the stock in question will go up to their break even point so they can liquidate their position. In order to forget this nightmare ever happened.
No, if they are to follow “Buy Low, Sell High, Go Short & Cover” they will be forced to start asking question after the first 2-3% down. They will be forced to make a decision on whether or not they should liquidate their position as soon as various technical confirmations arrive. They will be forced to make a decision if it makes sense to go short in the same underlying security in order to make money on the downside.
As a matter of fact, some of the most profitable trades or investment opportunities develop in this very fashion. It is often the most popular stocks that trend higher for many years, appreciating at many multiples to the market. Only to stop abruptly for no apparent reason and then decline 50-80%. Presenting “Buy Low, Sell High, Go Short & Cover” investment strategy followers with amazing opportunities to profit from both sides of the equation.
Let’s take a look at one of such companies. Netflix, Inc (NFLX).
Company Description: Netflix, Inc. operates as an Internet television network, is engaged in the Internet delivery of TV shows and movies directly on TVs, computers, and mobile devices in the United States and internationally. The company operates in three segments: Domestic Streaming, International Streaming, and Domestic DVD. The company also provides DVDs-by-mail membership services. As of May 21, 2014, it had approximately 48 million customers in approximately 40 countries. The company was founded in 1997 and is headquartered in Los Gatos, California.
To Be Continued On Monday…….
Long/Short -OR- Buy Low, Sell High, Go Short & Cover? Google