Just some basic rules of thumb that I codified and wrote down and follow strictly - if goes 10% past what I feel the value is (based on my model) then I put it on a watching brief. If it goes 30% above what I think the value is then its in my sell zone and if it goes 50% above what I think the value for the next year then its a mandatory sell (that's what happened here). Basic tenet is that businesses revert to their value but that that doesn't stop businesses continuing to "pop" when they are on a run so that's why I let it run to 50% above fair value.
My back test with things I follow (higher quality businesses with strong free cash flow and a decent return on equity) is that basically, every 10% extra over value means a corresponding 20% - 25% increase in the risk of it falling back to fair value within the next 6-12 months.
I also use 80% trailing stop losses of the 52 week high - generally works well since I don't have invest in micro caps. That's just based on the mathematics of a 20% fall requiring the stock to go up 25% from that point to get back to "even" and that's more a capital preservation thing for when things I buy trend down even below what I think is fair value - so the basic idea there is to cut the losers.
Let winners run (to a point), cut losers. Sounds simple and I let the rules above, and a few others, guide me and take the emotion out of it.
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$309.18 |
Change
-2.520(0.81%) |
Mkt cap ! $149.4B |
Open | High | Low | Value | Volume |
$309.97 | $311.31 | $307.86 | $126.5M | 409.4K |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
1 | 852 | $309.17 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$309.18 | 741 | 2 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
3 | 702 | 309.080 |
1 | 1741 | 308.390 |
2 | 911 | 308.180 |
3 | 717 | 308.150 |
1 | 911 | 308.000 |
Price($) | Vol. | No. |
---|---|---|
309.190 | 198 | 2 |
309.230 | 911 | 1 |
309.400 | 100 | 1 |
309.410 | 911 | 1 |
309.500 | 765 | 2 |
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