One stock, two lessons… Also, live event announcement.
SPECIAL NOTE: “LIVEDESK” SHOULD NOW BE ACCESSIBLE… I”LL BE REVIEWING LIVE CHARTS THERE AFTER THE CLOSE, HOPEFULLY BEFORE THIS EVENING. NOTICE WILL BE POSTED TO THE ACTIVITY FEED.
One stock, two lessons. Big fish in a little pond, and averaging down.
Lesson One: An interesting characteristic about days like this is what I call “the paucity of positives.” We”re seeing a great example today.
There is a sea of red in the our sector”s universe. Only two or three exceptions, and one of them is VAPR.
VAPR had news this morning, which on any other day might have been lost in the crowd. Today it was the only marketing achievement being publicized.
Much more news has been released by many other companies since then. TRTC, USEI, MJNA, PHOT, CBGI… Good for them! But also too bad, because their stocks were already part of the problem.
That left very little timely information in the sector. To be sure, several stocks opened firm, and have since reversed a little or a lot into negative territory. That left only one news story that already had demonstrated a positive reaction.
Now, this can cut both ways. The stock that attracts all of one day”s buying interest will find it difficult to compete the following day. But at least we can see VAPR has this ability. It will be on any buy list of mine when we start picking at this sell-off.
Lesson Two: VAPR is also a candidate for “averaging down.” Someone who already owns the stock as an investment might be interested in increasing that position.
Generally, I am opposed to this. Averaging down — buying more of the same stock, but at cheaper prices — certainly seems compelling since it lowers the average cost basis of existing shares. Suddenly, without the stock rising. the “mistake” of buying too soon or of holding too long can be mitigated by averaging those shares with the newer, cheaper lot.
Guess what. You can”t have it both ways. You”re also buying the new shares at a premium. Smart move, Einstein.
However, I”m in favor of adding cheaper shares if there is some development that makes it worth paying a premium for the newer shares. Performing well in a bad, bad market would qualify for consideration.
Trading around a core position — increasing and decreasing exposure as the market may make attractive — that also might justify buying more at a lower price. But that opportunity I”m not sure has yet arrived.