About Murray Cass Expertise I am eager to help investors find their way through the muddle of tech investing. I can answer questions concerning tech investing, financial reports, stocks, and options. Having worked in the computer industry for over 20 years I have a good general knowledge of computer technology. I have read over 100 investment books -- mostly the old ones. I spend my time doing investment research, attending annual shareholder meetings, and managing portfolios.
Experience Professional Engineer, MBA, over 20 years experience in computer industry, 9 years intensive investing experience.
Question Hi I have just been trading for a month and still trying to understand the market. I have been mostly looking at charts and news reports but I think that these stocks are under inflated. I wanted to get your opinion on my choices
ARBA
CSCO
JNPR
I have 1500 dollars which I know isnt much but its what I've got. Should I watch till they fall then buy. When I do buy how long is the most profitable method to hold on to a stock. With that much money do I only want to buy one of the stocks. I'm trading on datek.
Thanks for your help,
Paul
Answer Hi Paul,
If you ever get around to understanding the market don't forget to let the rest of us know your findings. :-) The market is a funny place -- even for veterans of many decades. Don't expect it to obey the laws of reason and fair play.
The stocks you mentioned are all well down from their highs. Both arba and csco are suffering from poor business conditions. They both have lots of competition -- jnpr being one of the nimble ones csco is facing. Jnpr dropped not because business is bad but because its valuation was too high and it got caught in the tech sector downdraft.
Arba has its hands full with cmrc, itwo, orcl and others. Financially it is a strong company and can whether the storm. There are questions about weakness with strategic alliances and holes in its product offerings. It might become an acquisition target but you can never tell about that. I would not buy arba for a quick gain. If you are only buying one or two companies I would not recommend arba.
Despite csco's recent announcement it is a solid company with seasoned management, good products, dominant market share, and good financials. Again it is not a good pick unless you have a long holding period in mind. And even then it is not particularly cheap but csco never has been cheap -- the good ones rarely are. So it might now be about as cheap as you are going to find it. Buying solid companies during bad periods is a good investing strategy but it requires patience.
Jnpr is a great company that is now selling at almost a reasonable price. I just don't like their huge debt. It has lots of room for growth. The nice thing about small companies is that they can steal market share from the big guys (like csco) and still grow in bad markets. (Look at nvda for a great example of this.) Jnpr would be a fine company to pick up but in this environment I would again be prepared for a long holding period.
Should you watch till they fall before you buy? Only if you know they will fall further. I don't. No one does. So good luck. If you make a decision that you like a stock and it is reasonably priced I do not recommend waiting to buy. I like to scale, that is buy a little at a time, but you can only do that if you are establishing a larger position.
How long should you hold? Technical traders can show you chart patterns which will help you sell -- supposedly. I don't read charts so I can't help you here. You could sell when a stock hits fair value. I don't like that either as stocks usually go up well beyond fair value. I would tend to scale down. You could set target prices but they must be based on something. You might listen to analysts you trust for help with targets. My advice is to hold until the story changes and you no longer like the company -- new management, new direction, tougher competitive market, etc. Usually you will do better if you trade less often and hold longer. Just make sure you hold quality companies.
With $1500 you should buy no more than 2 stocks. You might want to consider buying a mutual fund. It's up to you. You learn more by trading stocks. You also don't pay the mutual fund fees which often don't buy you anything (they do a lot of advertising and administration that you are funding).
If you are new to investing I strongly recommend that the first things you buy are books not stocks. Try authors like Peter Lynch, John Train, Gerald Loeb, anything about Warren Buffett (WB Portfolio by Hagstrom is good), Michael Murphy, Ben Graham, Jack Schwager (the money masters series is good), Roy Neuberger, Phil Fisher, Phil Carret, Marty Zwieg, Bernard Baruch. I prefer books written by people in their 90s (Fisher, Carret, Neuberger). The Wiley Classics series is excellent.
Boring! I know reading is not as exciting as trading but they are actually very interesting books to read - esp. when they recount investment experiences from the 1920s on. Reading decent investment books will be your best investment.
