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Cirrus Logic Inc. Message Board

  • kbononi kbononi Oct 28, 2010 11:45 AM Flag


    Subject: Re: Fwd: Re: Next Inning Alert - CRUS FQ2 Earnings: Selling Way
    Sent: Oct 21, 2010 4:28 PM

    If you're going to invest in tech stocks (many other sectors as well) you
    should expect volatility and that it will have an inverse correlation with
    market cap and the long-term dependability of the company's earnings
    stream. In other words, CRUS should be more volatile than most tech
    stocks due to its relatively small market cap and past history of highly
    uneven results.

    One of the reasons I like using a multiple buy strategy is that it takes
    advantage of volatility. You never know what price will prove to be a
    bottom or a top. However, when you are planning to build an allocation
    over time you'll actually find yourself pulling for a dip so you can buy
    more shares at a lower cost. Then, as (if) things work out as you've
    planned and the stock goes up, you can again take advantage of volatility
    and begin hedging with covered calls or thinning (again with several moves
    just as you did when building the position). You can see how the first
    half of this strategy worked with building the DRWI position in the NI
    portfolio. Even though I started buying way too high (we know that now),
    by sticking to the multiple buy strategy I ended up with an average cost
    basis of only $7. As a bonus, as (if) the price goes up to my double
    digit objective I can thin by first selling shares that are at a high
    relative cost and, thereby, manage what would be the tax liability.

    The bottom line here is there's more to it than just picking good stocks -
    technique / strategy makes a lot of difference in the long-term results
    and, more important, in minimizing stomach acid.

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