Contrarian view - Stock picking
We all have our own way, reasons or not for picking the stocks we decide to invest in.
My own personal method, is usually to look for a company that used to be priced higher than it currently is, see if I can find any information as to why it's price dropped and then search to see if I can find any news or information that might suggest a recovery. Why is this contrarian? 'Cause I'm usually just going into a stock after everyone else has run away to the hills. Ok it can mean you have to wait for a result, but it can be worth the wait and if it never recovers.........well thats the risk and the volume of shares bought should refelct that possible risk.
On the occasions that I have stuck to this method, Ive had some success. eg Tadpole I first bought at 3.5p or thereabouts and it went up to 20+p so I had profits as I bought and sold on its wobbly way up and down. However.......I held more than I sold and am currently down on them to the tune of several thousand, as are a great many. Not to worry though. You don't have a loss until you sell, so I might yet get my stake back there if I live long enough......lol
Tadpole when I first bought it, was a recovery stock. I'm kicking myself 'cause I found another one- Paypoint, 2-3 years ago (different name then) but they had had a massive drop, but they were making these machine thingies so folk could pay bills when they did their shopping.....good idea me thinks........Shame I didn't buy any (didn't have spare cash at the time) as they went up 195% since i put them on my watch list at £2.11. They were actually up more than that but have retraced to £6.22. Oh dear, thems the breaks. I still think they might be worth a punt and might put some of them into my ISA this year, we'll see.
The company that I'm looking at just now is a Blue Chip one, shares currently £34.23 each - ouch I hear you say...but ok So I might just buy 10 or 20 of them but if they go back to the £56.00 approx that they were just over a year ago then hey Bob's your uncle. Who am I talking about - Caterpillar but why.....
Well Caterpillar (CTA.L) did a 2 for one stock split in June 2005, which is why the massive dip in their chart occurred. They pay a quarterly dividend and never miss one, so even if the price stays static, you make something. What I'm most interested in though is that they have just announced another $7.5 billion share buyback (they are just completing a previous buyback early) AND they are moving their Asia /Pacific HQ from Tokyo to Bejing.
http://www.chinadaily.com.cn/bizchina/2006-11/22/content_739474.htm
China are on a massive ifrastructure spend just now and CAT are right in the middle of it. They were main suppliers of heavy equipment for Hong Kong International Airport, are involved in 3 Gorges Dam (massive) and are placed well for the upcoming olympics requirements.
This might be a buy and hold........wow that sounds a bit safe for me. I'll post some data on Caterpillar soon.
