Friday, December 06, 2013
The Burning Building Stock Investing Method
Buy, Buy, Buy: The “Burning Building” Theory by Ian L. Cooper Speed Retirement System
“Never buy a stock hitting a 52 week low…”
“Stocks in downtrends tend to stay in downtrends…”
“It’s too risky. It’s not safe…”
“Any stock hitting a 52 week low will always be weak…”
Or, “nothing is more destructive to amateur investors than thinking that a stock trading near a 52 week low is a good buy.”
I’ve seen it all before. And none of it makes much sense to me.
Amid the mind-numbing chatter of the alleged pros, I’ve been quietly buying up some of the biggest names on Wall Street at 52-week lows…before they pop.
When Apple (AAPL) hit a 52-week low under $400 a share, it was stuck in a solid downtrend, it was risky, and it looked weak.
But only a fool would ignore it just because it hit a 52-week low.
Using the above logic, here was a stock stuck in a downtrend that should have stayed in a downtrend. “Any stock hitting a 52 week low will always be weak.”
You’d actually pass up a monumental opportunity just because it hit a low?
At least a dozen people have told me they absolutely knew a stock like Outerwall Inc. (OUTR) would run much lower, but a funny thing happened after each and every know it all told me that…
The herd, and the experts, had it all wrong.
Every single time Outerwall plunged to new lows, investors ran scared.
We, however, knew better. We ran into the burning building and waited. We knew the stock would come back.
It was too big to fail – it was never going out of business.
I’ve learned over the years that the time to buy is “when blood is running in the streets…even if that blood is your own.”
Those were the very words of Baron Rothschild, whose family is now worth a staggering $400 billion. Time and time again, the family kept cool heads during times of absolute panic. They made a fortune from the Battle of Waterloo and countless other events.
I’ll admit it’s a hard maxim to follow – your instinct is to follow the herd.
It’s counterintuitive to run into a burning house not knowing if you’ll come out alive.
Investors run scared. They don’t know it but they’re selling everything at the wrong time. As Warren Buffett will tell you:
“Be fearful when others are greedy and greedy when others are fearful…”
Every one is afraid of the burning house.
But the best time to rush a burning house is when things look grim for big companies that will never see the inside of a bankruptcy courtroom.
Never listen to any “pro” or trusted analyst that tells you to run from, or avoid stocks at 52-week lows. They haven’t done their homework.
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