In terms of the market, I believe that we have hit the bottom on Oct 10th. Looking at some of the stocks right now, some of them are trading below or at their book value, meaning that further decline in prices represent excellent buying opportunities, especially for companies that have positive net cash flow for the past 5 years.
The market rallied today and yesterday and I expect a small drop tomorrow or the day after with some profit taking going on. I believe that over the course of the next month that we will likely see a 30%~40% increase in stock value as the market rebounds.
For the past few days, I have been skimming small profits on volatility in prices over a period of a few days (and no! I am not doing intra-day trading).
I will now be changing my strategy to pick up some stocks that I think are undervalued starting tomorrow and hold them for the next month and then pull out of the market after gunning for a 30%~35% appreciation in capital value. During the whole financial meltdown, I have not gone on margin (I abhor loans!) however in this case, I believe that I am willing to go on margin for about 50%~75% of my equity (ie. a debt:equity of 0.5:1 ~ 0.75:1) for a short period of time.
Fortunate for me, amount of capital I have at stake, though a moderate sum, will not put me into financial danger in the worse case scenario. This next month will be interesting.
The reason I write this is to prevent myself from getting caught up in the day to day movements in stock prices (as watching the numbers is quite addictive!) and focus on a medium/short term plan.
I will post more later on.
Wish me luck.
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