29 April 2007 – There’s a technique I call re-visiting the same stock that I’ve used many times to make easy 25% to 50% profits after taking triple-digit profits from the very same stock on my initial position. The way this technique works is that when I think that the stock starts looking toppy and perhaps the regional market it trades in starts looking toppy as well, I’ll sell out of the entire position and lock in profits. Then, unlike most investors that are satisfied with a triple-digit gain on a stock, instead of forgetting about this stock, I put it on a list of stocks to continue monitoring. To do so, takes no more than five minutes a day for perhaps a list of 6 to 8 stocks so it really requires very little effort. Then, if the stock tanks for no good reason other than the fact that a good correction was necessary in order for the stock to continue higher, I’ll buy back the stock and make another easy 25% to 50% gain (in usually what is a 6 month to 12 month period). And if the risk-reward setup is compelling enough, I’ll even buy options instead of the underlying stock as was the case for BIDU this past month which allowed my to reap 50%, 85% and 400% gains from the May 100 Call Options in less than 14 days.
One stock that I’ve already made over 100% gains on is Chinese advertising company Focus Media (FMCN). Since I’ve sold out of it, I’ve stayed out of this stock, but this morning, I looked at its chart and am considering getting back in. As a price target, I would have much preferred getting in around $36 a share but it gapped up significantly higher at the end of last week. In any event, I haven’t yet had time to perform the type of analysis on FMCN that I did on BIDU and GM that would allow me to make an intelligent decision on the risk reward setup of this stock at its current price. However, I am saying that the chart looks compelling enough right now to justify a deeper analysis of this stock to make a quick determination.
[tags]Chinese stocks, Baidu, BIDU, Focus Media, FMCN[/tags]
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J.S. Kim is the founder and Managing Director of maalamalama, a comprehensive online investment course that uses novel, proprietary advanced wealth planning techniques and the long tail of investing to identify low-risk, high-reward investment opportunities that seek to yield 25% or greater annual returns.