There are many strategies in the world of investing, how to buy low and sell at a high price and one of the strategies is The Contrarian method as described by Benj Gallander in The Contrarian Investor’s 13 published by Viking Canada, Toronto, 2002. The author writes the Contra the Heard Investment letter and have been doing so for over 15 years. The title of the book refers to 13 rules which will help you to invest or examine companies that are undervalued and should rise in value over the coming year or two.

Rule 11 is Practice Patience. Having patience is easier said than done, it is increasingly hard with the internet and always being on. However, you need patience to buy, to hold and to sell. The race is not to the swiftest.  Remember haste makes waste. On the Contra list there is about 175 stocks, most will not be bought or sold. If you do fewer but better trades leads to more success. Take time to analyze why changes happen? did something happen to change your analysis?

Whenever you buy a stock, you should have an exit plan or when to sell. There are 3 reasons to sell a stock: the company was misjudged and should not have been purchased; there are tax advantages; and the company is now reasonably or overpriced. If you are setting prices when selling use .4 or .9 to sell and on the buy side .1 or .6.  Once it is sold, you might watch the price for 3 months to see if you generally sell too soon or get it about right, if you sell too soon add 10% to your targets and you will be within range.

Rule 12 is Make Numbers Your Friends.

Companies produce an Income Statement and Balance Sheet every year, the income statement indicates the profit and loss for an operation. The balance sheet shows how well the business did over the course of the year. From the income statement and balance sheet comes ratio analysis which allows you to compare with other companies and offer clues where the company is headed towards. Doing this part of your homework allows you to know when to avoid buying the shares.

Rule 13 is Calculate Your Results. You should know how well you are doing.

Linking to dividend paying stocks, now matter what system you use, elements of all rules will come into play. Besides expecting more, why are you picking that stock as opposed to another? if you do your homework, you will know when to sell or not to sell. There are some great companies that have existed for 100 years, but there are many that are no longer to be found.

There are more questions than answers, till the next time – to raising questions.