This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Suddenly Looks Like a Buy

NEW YORK ( TheStreet) -- The difference between an investor and a trader is time.

Investors have it. Traders don't.

Which brings me to today's least-favored stock, Amazon (AMZN - Get Report).

Everyone who loved Amazon at $400 hates it at $300. Jim Cramer writes that there is an "Amazon Army," companies that prefer growth to profits, which is now "toxic" to your portfolio. Richard Suttmeier sees a bubble that has popped.

In the near term, they're right. Fashions have changed. High multiple stocks like Amazon are out of fashion right now. But for investors, with a longer time horizon, this may be like seeing Apple (AAPL) at $400 a few years ago.

Traders follow the moves of the market, watching one another as much as the stocks they might buy, looking for momentum they can follow. They worry about the pennies that high frequency traders might grab on ordinary purchases, and the dollars they might grab on sudden moves, because they think they can grab those pennies and those dollars.

Investors should keep a list handy of great American companies, and buy them when they're being hated on. If it's a short-term hate, maybe it won't hit your target price and you'll have to wait. If it's a trend, like Apple's plunge from $700 to $400 after it first announced a dividend, or Amazon's recent fall of 25%, you may find yourself with a bargain.

Buy the bargain, put it in your portfolio, then go back to your list and wait until another bargain comes along. Keep the rest of your money working in a broad-based mutual fund with a low expense ratio.

Investors are like the $10 bettor at the horse track. You need to nibble, not grab with both hands. Then just hang on, until your stock is so beloved it becomes overvalued. This is how Warren Buffett got started. Now he has to buy whole companies, and his work is harder.

This does not mean you won't take losses. The value of my account plunged nearly 50% during the Great Recession. But now it's up nearly 50% from the previous top.

I'm no genius. Nearly everyone else who could hang in is doing as well. I'm not playing to beat the market. Most of what I have is in mutual funds. The individual stocks I buy are truly "mad money."

Sometimes I get burned this way, buying shares that still have room to fall. I got back into Amazon too early. But I was underwater on Apple for months, too, and it's now up 27%. I bought Walgreens (WAG) last year, it faltered a little but is now up nearly 18%. I bought Aflac (AFL) two years ago and it's up 30%.

The fact is, Amazon at $300 is the same company it was at $400. Every dollar that comes in the door leaves to fight a new battle. So Amazon is talking about building its own phone, making its own chips, about making its own deliveries and deploying drones.

Based on its own strategies it's doing well. Sales were up 23% from the first quarter of last year to this year. The company even booked a small profit. It could still pay out its long term debt from cash, today. It's still a cash flow machine.

So what if it's out of fashion. Let traders buy fashion. I'm playing for my retirement. If you're doing the same, I say, buy solid companies that are completely out of favor and wait for the traders to change their minds. I think your patience will be rewarded.

At the time of publication the author owned shares of AMZN, AFL, AAPL, WAG and AFL.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AMZN $490.48 1.74%
AAPL $94.27 -0.76%
FB $101.00 1.47%
GOOG $684.12 0.89%
TSLA $143.67 -3.09%


Chart of I:DJI
DOW 15,914.74 -99.64 -0.62%
S&P 500 1,851.86 -0.35 -0.02%
NASDAQ 4,283.5920 +14.8290 0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs