DartboardYou can make the case that stock picking is actually market timing: There are entry and exit times for any stock which are profitable, were they knowable in advance. Another version of this is that even for a "bad stock" with lots of trading volume (eg, C, WM, CFC, SLM, AMD), there were investors who bought and sold (or — cough — sold then bought) at profitable times. It is hard to pick stocks (buy and sell points), with expectation of profits or beating some benchmark, because thousands of your betters have superior information, research, and reasoning. Timing based on cash flow? Valuation? Relative strength? Debt? Patent pipeline? They all work sometimes, but how many (including big fund managers with best resources, e.g. Bill Miller) beat the index year after year over time?

Furthermore, its hard to capture the "free lunch" of diversification (away of idiosyncratic risk) with fewer than dozens of stocks — and then how to follow them all sufficiently to time them? The meal seems to me to be use of leverage to time signatures of immutable human weakness; which winds up asking whether the fear/panic reaction is written deeper in the collective mind than it is in yours.

Tom DeBolske replies:

I saw on CNBC the other day that the best hedge fund managers on the planet are right only 58% of the time. I don't see that my "betters" with their "superior information, research, and reasoning" have that significant an advantage. We all make our stock picks using whatever method we are comfortable with. With any stock at any time it's a 50:50 proposition. The trick to stock picking is to keep your losses to a minimum while letting the winners run.

Vitaliy N. Katsenelson writes:

In my book book Active Value Investing: Making Money in Range-Bound Markets I argue the long-term (10 + years) secular trend of the market will be essentially flat.  However, it will likely comprise a lot of small bull, bear and range-bound markets.  I argue that timing the market (at least for fundamental investors) is a fruitless exercise.  Instead, time (price or value) individual stocks.  I provide a Quality, Valuation, Growth (QVG) framework.  Quality and Growth dimensions of analysis help you to identify good companies, and cheap valuation will make this good company a good stock.  Yes, time stocks.  Identify a couple hundred good companies (Q and G dimensions), buy them when they turn into good stocks (all QVG dimensions line up), sell them when them they stop being good stocks (Q and/or G dimensions deteriorate or stock reaches fair-value point — V is not there any longer).


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