Bottom Fishing - What Could Go Wrong?
This is a Post from the Symbol Surfing Blog from Mon, Aug 6, 2018.
Of course, there is risk involved with any investing strategy.
Bottom fishing is no different.
Bottom fishing is the process of investing in assets that have experienced a decline due to intrinsic or extrinsic problems.
Why would anyone take on this risk in particular?
In other words, why buy a stock at or near a 52 week low?
After all, it is entirely likely that a stock at a 52 week low could easily move lower.
The attraction of bottom fishing for investors is the potential upside.
I have used this strategy a few times in the past with mid-cap and large-cap stocks on Symbol Surfing and overall it has worked out well...eventually.
In some cases, the stock moved so much lower than my initial purchased price I averaged down.
Averaging down only makes sense if I still like the company.
Otherwise, I sell and take the loss (or the "L" as kids say).
Those trades ended up becoming very profitable.
In the case of NWL, I placed a small bet on Wed, Jul 11, 2018.
There was a significant decline after the recent record high levels mainly due to a couple of earnings disappointments.
I thought it could not get worse and it appeared to me that the stock price had stabilized and even started to move upwards.
If this stock went back to it's previous high, it would represent a 100% return.
For me, I wouldn't necessarily wait for that.
I would be happy to get a smaller return of 90%.
Seriously, on this trade, I was looking for a 10% move which is about $3.
Enter today's earnings announcement.
Soft Sales & Margin Trends to Hurt Newell's (NWL) Q2 Earnings
The stock price is down 14% today.
So here we go...again.
Fortunately, there is a 3% annual dividend yield and a decent dividend payment history.
I don't know what I am going to do with all that dividend money.
Oh and to make matters worse, NWL hit a new 52 week low right before the close today.
Once again, bottom fishing is not for the faint of heart.
At this point, I'm down about 18%, but I am gonna hang on to this low pe stock for now.
Who's with me on NWL?
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SELECT * FROM `history_nwl_nyse` WHERE `symbol` = 'NWL' AND `exchange` = 'NYSE' AND `date` = '2018-08-06'