It is a common sense in the Wall Street that never catch a falling knife. However, I have just caught one. The stock I bought is a health equipment company that has just fallen out of favor: The Johnson Health Technology (喬山). Its share price falls form 290 to currently 57, because of earning surprise. The company had encountered a net lost last Q2.
I have no doubt that it was a good company, and I hope it still is. It is not my purpose to write all its merits here, but the company has an international brand name, and a strong earning record. People consider the U.S. recession had made it difficult to sustain a good earning level. Yes, due to the sub-prime problem.
The P/E ratio now is about 19 and EPS is 3. Why don't I wait until its EPS drops below 15? Or wait until P/B ratio is less than 1.5? Isn't it risky to buy at a 19 P/E?
That's right, I shall wait until the price goes down to a comfortable level. I have made a mistake to risk on this price simply because I think it has already dropped quite a lot. The price may go down further until its earning recovery. Until then, I shall wait. Somehow, I have taken a unnecessary risk.
I think over this problem again and again these days. And I get the point finally. Fortunately, I have bought the stock with only one third of my target amount. The other two third shall wait strictly until a proper price comes out.
I have no doubt that it was a good company, and I hope it still is. It is not my purpose to write all its merits here, but the company has an international brand name, and a strong earning record. People consider the U.S. recession had made it difficult to sustain a good earning level. Yes, due to the sub-prime problem.
The P/E ratio now is about 19 and EPS is 3. Why don't I wait until its EPS drops below 15? Or wait until P/B ratio is less than 1.5? Isn't it risky to buy at a 19 P/E?
That's right, I shall wait until the price goes down to a comfortable level. I have made a mistake to risk on this price simply because I think it has already dropped quite a lot. The price may go down further until its earning recovery. Until then, I shall wait. Somehow, I have taken a unnecessary risk.
I think over this problem again and again these days. And I get the point finally. Fortunately, I have bought the stock with only one third of my target amount. The other two third shall wait strictly until a proper price comes out.
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