• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint
Share this Page URL
Help

Chapter 9. Stock Selection and the Optio... > Maintaining Fundamental Clarity

Maintaining Fundamental Clarity

There is a tendency among investors to believe that good values are difficult to find. However, confusion arises in an attempt to define “value” in the market. Some investors believe they should buy stocks that double in value immediately after they purchase shares. So, even conservative investors may end up chasing short-term profits and conclude that it is difficult to find value—by a double-in-value definition—with any consistency.

Under a truly conservative standard, a quality investment should be defined as a strongly capitalized, well-managed, profitable, and competitive company whose stock has performed strongly and consistently, and whose fundamental and technical risks are a good match for the conservative profile. Under this definition, there are many good values to be found in the market. The argument against covered call writing—that you risk losing stock—is often premised on the idea that a particular stock, once lost, cannot be replaced. In fact, though, good values abound and can be located using fundamental criteria. You may want to develop a list of prequalified companies. The list may be far larger than the number of stocks you can afford to own, but it broadens your strategic range, and you come to realize that having “good” shares called away is not truly a loss. As long as you can consistently earn current returns in your portfolio and maintain a conservative standard, there is no real lost-opportunity problem. You simply replace one opportunity with another.


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint