Saturday, February 28, 2009

I am finalizing my buy list.

This weekend's chore is to finish constructing my list of most wanted companies and to prepare myself to purchase stocks. No, I'm certainly not purchasing in the next few days, but it is getting close enough that I need to have my list prepared.

I'm not trying to catch the market bottom here (once again, I'm not a trader, I'm an investor) I've just been trying to protect myself from enormous risk and give myself the opportunity to buy great companies at great prices. I felt like the S&P 500 at 900 points carried enormous risk, and I remained in my short positions. I'm looking for another 15% drop or so in the S&P 500 and then I'll start looking at buying opportunities.

When I spoke about how low I expected the S&P 500 to go last year, I gave 650 as the TOP of the range. If I recall correctly, I also gave out 400 as an entirely reasonable estimate of how low it could go (earnings falling to $40 per share, with the recessionary average of 10 times earnings giving 10 x 40 = 400).

I'll point out again that S&P 500 analysts expectations of earnings of $89 per share were atrociously bad and still are.

At some point I'm going to buy in even though I think there is more room to fall, but the alternative of trying to catch the bottom is a losing game. I have no idea where the bottom is, but I know I should buy cheap stocks when they are cheap and hold them for a long time, and things really are that simple. Once the S&P 500 gets into the mid-600s, I will be comfortable making purchases and just dollar cost averaging from there should stocks continue to fall.

Speaking of stock lists, I'm finally back in the top 50 investors in CAPS now that the sucker's rally has finally ended. I lost quite a bit of position during that rally, but I didn't change anything because I still believed in the long-term thesis.


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