When To Buy A Stock – When To Sell A Stock – At what price it is best to buy a stock, what is the investment return you can expect and then of course, when to sell. How much cash to hold.
When To Buy A Stock – How Much Cash – When To Sell A Stock
Q2 hedge fund letters, conference, scoops etc
Transcript
Good day fellow investors, we continue with our value investing schools. And today we'll discuss the questions that plague all investors, when to buy a stock? How much to buy of that stock? How much cash to have? What is the best cash portfolio exposure on what that depends, and then when to sell a stock. So went to buy, how much cash to have and when to sell a stock? That is, I think the question everybody always looks for an answer to, and in this video, I'll give you my perspective on those things and how I think I can help you. It's a normal value investing business perspective. And that's the only perspective you can have to find the answer to those questions. Let's start. So when it comes to buying, selling, holding, Buffett has a cool baseball analogy, saying how you should wait for the right pitch, that's you have to have patience. And keep in mind, you can't get strike out.
So you can say no to 99.9% of the opportunities out there. Because those come and go. And those always come all the time, new opportunities, so you have to have confidence that there will be more opportunities. So when to buy a stock, there is a two part answer. But it's pretty, pretty simple. Depending on the ratio of patients you have, you don't just buy a good buy, you have to wait for it to be in a sweet spot to pitch it. A sweet spot for a value investor is low risk, high reward. So when you find that, then and only then you buy that would be the value investing, let's say core, but you need to have a lot of patience, a lot of confidence. And the more research you do, the more such sweet spot investments you do, if you're not that, sure, you can buy a little bit, buy more if it goes down. But with experience I'm seeing Okay, I really know when to wait. And then by only when I am really certain the investment is at the sweet spot, then you limit your downside and increase your upside.
The key is, of course to buy below intrinsic value so that you have a margin of safety. What does that mean? For example, if I have a mine, and I know the value of the metals in the ground is 10 billion, and the present value of that is 1 billion. And I know that everything has been built, everything is working, given the cycle of the prices, and I can buy it now for half a billion. But the word of everything there is 1 billion, then I know okay, I'm buying at the 50% margin of safety. And I'm getting to the 1 billion by looking at average long term prices. So that's a 50% margin of safety. And then you simply say, Okay, now it's time to buy, some companies have cash per share, we recently bought one Chinese stock that had $4. in cash, the price was $4. Okay, so I'm practically just exchanging currencies, looking for margin of safety. And the more research you do, the more you find those sweet spots that you can buy and take advantage of the opportunities that the market gives you, you constantly compare to all the list of the portfolio have and then you buy just what you think is good. And when you find that good, then you buy how to know what is good, well, depends on you, I am focused on 15% returns per year in high. So when I find 50% with low risk and higher reward 15 or higher, then I buy if you don't do so much research as I do, if you're happy with 10% 8%, when you find the good business with low risk that gives you 8%, then you should be happy about it.
If you're happy with 8% business, your dividend plus earnings plus growth with the moat with a margin of safety, then you simply buy that and you're happy with 8% if it goes down 50% and the yield becomes 16% or 12%. You simply buy more invest dividends, and you are happy owning more of a business. So when to buy, it depends on you 8% 10% 12% 15% 20%. And Buffett says that if he would be managing a million he would be making 50% per year so that is his return threshold. So depends on where you are on the list. I'm between 15 and 20. Now, given my experience and my research, that is the answer when to buy a stock for Buffett it's 50% with a million to manage now it's between eight and 10% with 500 billion to manage but it's up to you to decide when a stock is a by depending on the business yield you're happy with from the investor the second part of the went to by story is about patience. So you can set your threshold This is it I want will buy only if something gives me 10% But what happens if in a year you don't find anything, you get dividend something gets bought out so you have nothing.
