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Don’t Try To Time The Market. Just Don’t.

Real Money's Paul Price says market timing is the 'Great Myth,' the white whale of investing.
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Timing the market means trying to actively buy low and sell high. And ideally it is what any investor wants to do. (After all, that’s literally the definition of how you profit off a long position.) Getting your market timing consistently right would make you rich. The problem is that no investor ever gets their market timing consistently right.

Paul Price recently put it this way in a Real Money column. “Stop worrying about market timing and whether the major indexes will finally see a long overdue 5% pullback. Most stocks suffered that drawdown long ago. Many fine companies are now available at huge discounts to both their true values and where they sat just a few months ago.”

Price noted that in a list of 12 stocks he’s been watching closely, 10 “far outperformed analyst expectations in their latest quarterly reports. In particular, “Caleres   (CAL) - Get Caleres, Inc. Report, Children's Place  (PLCE) - Get Children's Place, Inc. Report, Sally Beauty  (SBH) - Get Sally Beauty Holdings, Inc. Report and Designer Brands  (DBI) - Get Designer Brands Inc. Class A Report blew way past estimates, while aggressively raising guidance.”

And yet, “[U]gly retracements came despite almost universally good news on the earnings front.”

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In another case “American Woodmark   (AMWD) - Get American Woodmark Corporation Report missed badly due to surging lumber costs, which dinged margins ahead of price increases which are now taking effect. Management indicates the second half of fiscal 2021 (ends April 30, 2022) will see huge benefits from those price hikes and the subsequent reversal of lumber price spikes. I am adding to AMWD almost every day."

So what’s the takeaway from all of this?

“Don't waste the chance to buy while they are ‘on sale.’ Over the longer-term everything gets back to its proper valuation. Making the best gains means getting into them before the crowd gets wise. Once you own bargain stocks, simply have the patience to wait for things to get back to normal. Your portfolio will thank you later with much higher account values.”