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Market Timing and Discipline

by Vitaliy Katsenelson
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I am not a market timer, I have no idea when the market will turn – it is too difficult to execute market timing strategy on a consistent basis, in…

I am not a market timer, I have no idea when the market will turn – it is too difficult to execute market timing strategy on a consistent basis, in my opinion.  The worst thing that could happen to you is if you end up being right once about a change in market direction.  Why?  Because you’ll think that you figured it out and will lose (or not make) money in the process. My answer to market timing is a strict buy and sell discipline. For every stock in the portfolio I set a buy, hold and sell price (actually I prefer to set P/E targets).

Recently quite a few of my firm’s stocks have been hitting the “sell” range and we have been selling. In the roaring market, emotions guide us into doing the opposite of what we should be doing; they tell us “buy” instead of “sell.”  So I let discipline dictate what I do.

There are very few stocks on my watch list hitting “buy” valuations today.  The group that is becoming increasingly attractive is oil services stocks, however.  In fact, my firm took a position in BJ Services Company (NYSE BJS) last week and we’re looking to add more oil services names to the portfolio. We are buying these stocks because they are hitting our valuation targets, not because our emotions are telling us to do so.

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