The Importance Of Buying At A Value

[EricL]

I came across this article from 2012 on Seeking Alpha that is a great write up on the importance of entry point when buying a stock.

I'm learning this lesson more and more as I continue to research for articles I've written and also look back at some of the buys I've made in recent years.

Buy low/sell high is a mantra frequently quoted but rarely put into practice by the talking heads on television, but I've come to realize that buying stocks at a discount to normal fair value usually works out quite well over the long run.

---

For further point of emphasis, here is the updated FAST Graph for GD, its been a great investment for those who bought around the time of the article.

   

[cannew]

I got into DG investing because of The Connolly Report, and his rule is: "When they are value priced, I buy dividend-growing common stock and hold them for the income".

He also states "that your long term returns will be determined buy the price you buy at".

The question is what do you consider "value priced". For the average investor forget the "buy low", that's a fools game because no one knows when or how low a stock will go. What you have to do is decide on an entry point for each stock that will represent value to you (improve your income, your yield on investment, or lower your overall cost). Then buy. If the stock goes even lower, buy again. In the long run your returns will be good, maybe not the best (based on the best possible price), but it should be better than buying without a plan. If the price is above your buy price, wait.

[Concasto]

I agree. I am still building my core holdings and nearly every stock on my watch list is above its 50 day ema. I believe KO is the only stock red, which might be the first DG stock I pick up. Hopefully we have a sell off tomorrow on the jobs number, but with the fed printing as much as they are, it won't last I'm sure.

[Dividend Watcher]

Eric, I think many don't realize how good we had it in 2008-11. There were a lot of companies at fire sale prices. You may see it again but don't know if it will ever be that cheap again in my lifetime. As I just began to understand and implement dividend growth investing around 2008-9, it took me until well past 2010 to actually solidify my plans. Still learning all the time.

Cannew, I agree. There are times when the value is obvious. For other times, you need to apply your best edumacated guesses.

[rnsmth]

I primarily use FAST Graphs and Morningstar fair value estimates for valuation

[KenBob]

I stated before, I value stocks by comparison with corporate bond yield where the stock yield is adjusted for debt. Fair valued is a price range that stretches from a value that just considers current yield to a value that considers extrapolated yield in 5 years. I buy undervalued stocks which have a price less than the fair valued range.

If I ever get to the point where no stocks are undervalued, I will buy a corporate bond index fund. I don't believe in sitting on the sidelines with cash, so an alternative investment is what must be used as a buy criteria. Currently, there are still many stocks available that are undervalued by this criteria.